<PAGE> 1
SECURITY
FUNDS
SEMI-ANNUAL
REPORT
JUNE 30, 1998
* SECURITY INCOME
FUND
-CORPORATE BOND
SERIES
-U.S. GOVERNMENT
SERIES
-LIMITED MATURITY
BOND SERIES
-HIGH YIELD SERIES
* SECURITY MUNICIPAL
BOND FUND
* SECURITY CASH
FUND
[LOGO] SECURITY DISTRIBUTORS, INC.
A MEMBER OF THE SECURITY BENEFIT
GROUP OF COMPANIES
<PAGE> 2
PRESIDENT'S LETTER
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August 15, 1998
SECURITY
FUNDS
TO OUR SHAREHOLDERS:
[PHOTO JOHN CLELAND]
The six months just completed have been rewarding for fixed income investors.
The yield on the bellwether thirty-year U.S. Treasury Bond declined from an
already-low 5.92% at the end of 1997 to a near-record level of 5.63% on June 30
of this year. Long-maturity Treasury bonds were the star performers, benefitting
from the "flight-to-quality" effect of funds leaving the Pacific Rim area in
search of safer investments. Investment grade corporate, high yield, and
municipal bonds, however, generated favorable returns as well.
INFLATION EXPECTATIONS LOW
One of the primary factors affecting total return for fixed income investments
is inflation expectations. The ongoing financial crisis in Pacific Rim countries
has played a major role in keeping the inflation rate low in the U.S. so far
this year. As many of these countries try to export their way out of their
problems the cheap imports flooding U.S. markets keep prices on
U.S.-manufactured goods from rising. If U.S. goods are to sell, they must remain
price-competitive. Additionally, increased productivity on the part of U.S.
manufacturers is helping to offset the potentially inflationary pressures of
rising nominal wages.
We believe that the Federal Reserve Open Market Committee (FOMC) will continue
to leave their short-term interest rate targets unchanged for the remainder of
the year, depending on the severity of the Asian crisis. If conditions in Japan
should worsen, the FOMC might cut short rates in order to sustain our own
economic growth in the face of declining orders from foreign countries for U.S.
goods and services. Even under our worst-case scenario for the next six months
we would expect interest rates to remain near their current levels. If the FOMC
elects to keep the rate on Federal Funds at the current 5.50% level, it will be
difficult for long-maturity Treasury bond rates to decline much further. In the
absence of inflationary pressures, however, today's real interest rates (the
interest rate after inflation is subtracted) remain at historically high levels.
WELCOME TO OUR NEW SUBADVISOR
We are delighted to welcome Salomon Brothers Asset Management Inc. to our family
of subadvisors for the Security Funds. The municipal bond staff, led by
portfolio manager Marybeth Whyte, assumed management of our Municipal Bond Fund
(formerly the Security Tax-Exempt Fund) at the beginning of May. For investors
seeking income exempt from regular Federal income taxes this portfolio offers
the opportunity for attractive taxable-equivalent returns from a
well-diversified portfolio of investment grade municipal bonds.
In the pages that follow, our portfolio managers offer their views on the
performance of their particular portfolios for the past six months and discuss
their expectations for the remainder of 1998. As always, we appreciate your
continuing investments in Security products. We invite your questions and
comments at any time.
Sincerely,
/S/ JOHN CLELAND
- ------------------------
John Cleland, President
Security Funds
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1
<PAGE> 3
MANAGER'S COMMENTARY
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August 15, 1998
SECURITY FUNDS
SECURITY INCOME
FUND
CORPORATE BOND SERIES
[PHOTO OF STEVEN M. BOWSER]
Interest rates during the first half of the year traded in a fairly narrow
range, with the bellwether thirty-year Treasury bond beginning the year at 5.92%
and ending June at 5.63%. Within the time period, however, volatility reigned as
rates rose and fell frequently depending on whether the news story of the moment
related to Asian-induced economic weakness or to consumer-led strength in our
economy. The Corporate Bond Series returned 3.58% for the six months, slightly
underperforming the Lipper peer group average of 3.78%.1 The benchmark Lehman
Brothers Corporate Bond Index rose 4.15% over the same time period.
MORTGAGE-BACKED SECURITIES HOLDINGS INCREASED
In the second quarter we increased the percentage of mortgage-backed securities
in the portfolio to almost 20%. These bonds generally will lose less of their
value in periods of rising interest rates than Treasury or corporate issues,
because in periods of higher rates fewer homeowners are inclined to refinance
their mortgages. As the risk of prepayment on the securities falls, their prices
become more stable. The mortgage-backed pools we select for the portfolio
generally have been outstanding for five years or more (so-called "seasoned
collateral" pools), which also tends to lower their prepayment speeds.
CORPORATE SECTOR PERFORMANCE
Performance of the investment grade corporate bonds, which make up over half of
the portfolio, was mixed. Industrial issues performed well because of the
strength in the U.S. economy. Our U.S. West bonds added in this sector when the
company tendered for the bonds at a premium over our cost as a part of
reorganization of their corporate structure.
On the negative side, our gaming sector bonds issued by MGM Grand, Inc., and by
Mirage Resorts, Inc., weakened because of the "Asian effect"part of their
revenue, especially in their casino operations, comes from guests from Asian
countries. The Asian crisis also forced spreads on Yankee bonds to widen. We
felt this primarily in our banks with Asian exposure, including ABN AMRO Bank NV
and Santander Financial Issuances, Ltd. A third, Banco Central Hispanoamerica,
was also a negative as the emerging market countries felt the pain of the Asian
situation. Overall, however, we believe all of these companies provide good long
term potential for the portfolio.
THE HIGH YIELD HOLDINGS
The high yield corporate bonds, at 17% of portfolio assets, performed well in
three of the six months, and were neutral in the remaining months. The
additional yield provided by this sector makes it attractive for inclusion in
the portfolio.
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2
<PAGE> 4
MANAGER'S COMMENTARY
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August 15, 1998
SECURITY FUNDS
LOOKING AHEAD
With interest rates on U.S. Treasury notes and bonds at historic low levels, we
expect to look to other sectors such as corporate bonds and mortgage-backed
securities for their additional incremental return. We continue to keep our
average duration close to that of the benchmark index, refraining from making
interest rate bets with our maturity structure at this time.
Steven M. Bowser
Portfolio Manager
(1) Performance figures are based on Class A shares and do not reflect deduction
of the sales charge.
Corporate Bond Series
6/30/98
Credit Quality Rating
[ A GRAPH ]
AAA 29.2%
AA 11.7%
A 24.2%
BBB 15.9%
BB 17.0%
B 2.0%
Corporate Bond Series
Average Annual Total Return
as of June 30, 1998
<TABLE>
<CAPTION>
Class A Shares Class B Shares
<S> <C> <C> <C>
1 Year 5.67% 1 Year 5.04%
5 Years 3.82% Since Inception 2.36%
10 Years 7.36% (10-19-93)
</TABLE>
The performance data above represents past performance which is not predictive
of future results. For Class A shares these figures reflect deduction of the
maximum sales charge of 4.75%. For Class B shares the figures reflect deduction
of the maximum contingent deferred sales charge, ranging from 5% in the first
year to 0% in the sixth and following years. The investment return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
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3
<PAGE> 5
MANAGER'S COMMENTARY
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August 15, 1998
SECURITY FUNDS
[PHOTO OF STEVEN M. BOWSER]
U.S. GOVERNMENT SERIES
Interest rates during the first half of 1998 favored fixed income investments,
with yields on the thirty-year Treasury bond declining from 5.92% on December
31, 1997, to 5.63% on June 30, 1998. The ride down wasn't a smooth one, however.
Between those two dates the long bond yield rose as high as 6.07% in early
February and again in late April, and fell to lows of 5.79% in mid-February and
early April before moving down further in June.
Although this sort of volatility makes fixed income portfolios more of a
challenge to manage, the U.S. Government Series weathered the changes quite
well, generating a 4.03% return over the period and performing substantially
better than the Lipper peer group average of 3.62%.1 The benchmark Lehman
Brothers U.S. Government Bond Index returned 4.18% over the six months.
FOCUS ON FEDERAL AGENCIES HELPS RETURN
At June 30 about 38% of the portfolio's assets were held in Treasury notes and
bonds, just over 33% in Federal agency issues, and almost 26% in GNMA
mortgage-backed securities. The agency bonds bear slightly higher yields than
straight Treasury debt, and are placed in the portfolio to add incremental
income. Additionally, the agency securities in the portfolio have longer
durations, and tend to appreciate more than shorter-maturity issues in periods
of falling interest rates.
GNMA MORTGAGE-BACKED SECURITIES ACT AS BUFFERS
Like the Federal agencies, the GNMA mortgage-backed issues bear higher yields
than Treasuries, but also serve as a buffer in the portfolio because they tend
to drop less in value than Treasuries and agencies when interest rates rise.
This "buffer effect" happens because in periods of rising interest rates fewer
homeowners refinance their mortgages, and the risk of prepayments on the GNMA
securities diminishes.
In periods when the economic outlook is uncertain and interest rate volatility
is high, a mix of asset classes and characteristics helps keep the portfolio
performance more steady. For this reason we use a combination of intermediate
and long maturities, a broad range of coupon interest rates, and a variety of
asset classes such as agencies and mortgage-backed securities in the portfolio.
Our goal is to minimize wide swings in net asset value from day to day.
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4
<PAGE> 6
MANAGER'S COMMENTARY
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AUGUST 15, 1998
SECURITY
FUNDS
PLANS FOR THE COMING MONTHS
With interest rates on U.S. Treasury securities near historic lows, we will in
all likelihood increase the percentage of Federal agency debentures in order to
take advantage of their higher yields. We also plan to keep the portfolio's
average duration in line with that of the benchmark index, preferring to avoid
making bets on interest rate movements in uncertain times.
Steven M. Bowser
Portfolio Manager
(1) Performance figures are based on Class A shares and do not reflect deduction
of the sales charge. Fee waivers reduced expenses of the Fund and in the absence
of such waiver the performance quoted would be reduced.
Although the securities purchased by the U.S. Government Series are guaranteed
as to the timely payment of principal and interest by the U.S. Government, its
agencies or instrumentalities, the shares of the series itself are not so
guaranteed.
U.S. Government Series
6/30/98
Sectors Represented
[ A GRAPH ]
Treasuries 39.5%
Agencies 34.0%
Mortgage Backed 26.5%
U.S. Government Series
Average Annual Total Return
as of June 30, 1998
<TABLE>
<CAPTION>
Class A Shares Class B Shares
<S> <C> <C> <C>
1 Year 5.67% 1 Year 4.29%
5 Years 5.14% Since Inception 3.77%
10 Years 7.63% (10-19-93)
</TABLE>
The performance data above represents past performance which is not predictive
of future results. For Class A shares these figures reflect deduction of the
maximum sales charge of 4.75%. For Class B shares the figures reflect deduction
of the maximum contingent deferred sales charge, ranging from 5% in the first
year to 0% in the sixth and following years. Fee waivers reduced expenses of the
Fund and in the absence of such waiver, the performance quoted would be reduced.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
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5
<PAGE> 7
MANAGER'S COMMENTARY
- --------------------------------------------------------------------------------
August 15, 1998
SECURITY FUNDS
[PHOTO of STEVEN M. BOWSER]
Steven M. Bowser
Portfolio Manager
LIMITED MATURITY
BOND SERIES
Yields on intermediate maturity fixed income securities fell and prices rose
during the first half of the year as market participants came to realize that
inflation was likely to remain low, influenced by a continuing slide in
commodities prices and weakened conditions in Asian countries. The five-year
Treasury note, at 5.71% on December 31, 1997, declined to 5.46% at June 30. The
companion ten-year note dropped from 5.74% to 5.44% over the same period.
The Limited Maturity Bond Series performed fairly close to its Lipper peer group
average, returning 3.45% in the first half of the year compared with the peers'
3.61%.(1) The benchmark Lehman Brothers Intermediate Corporate Bond Index rose
3.71% in the six months.
COMPOSITION OF THE PORTFOLIO
At June 30 investment grade corporate issues made up the largest part of the
portfolio at 56.5%. High yield corporates added another 22.3%. Along with high
yields, mortgage-backed securities have a slightly heavier weighting at 17.6% in
the Limited Maturity Bond Series than in our other fixed income portfolios
because of their generally shorter durations and maturities. The average
duration of the assets was 4.31 years, longer than the benchmark index duration
of 4.12 years.
DIVERGING SECTOR PERFORMANCE
Our holdings of bonds issued by MGM Grand, Inc. and Mirage Resorts, Inc.,
weakened in the first half because of the "Asian effect"part of their revenues,
especially in their casino operations, come from guests from Asian countries,
and this inflow has slowed along with Asian economies. Despite lower revenues,
we believe the underlying credits remain strong and that the situation will be
temporary.
A second underperforming area was real estate investment trusts (REITs). Our
Equity Office Properties limited partnership bonds and B.F. Saul securities lost
ground because of an increased supply of new REIT issues. Again, this is a
condition we believe to be temporary.
Conversely, airline issues have performed especially well as low oil prices keep
fuel costs down. Our Southwest Airlines Company and United Air Lines securities
have made strong contributions to total return in the past six months. Because
the entire energy sector has been depressed by low oil prices, we are beginning
to see some attractive buys within that sector and may begin purchasing there in
the coming months.
MORTGAGE BACKED SECURITIES HELP IN WEAK MARKETS
The large weighting in mortgage-backed bonds--17.6% at June 30--in the portfolio
is helpful in periods when interest rates move up. As interest rates rise,
homeowners are less likely to refinance their mortgages, thus slowing the
prepayments on mortgage-backed securities. Investors' reduced fear of
prepayments helps the bonds hold their value better in such economic
circumstances.
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6
<PAGE> 8
MANAGER'S COMMENTARY
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August 15, 1998
SECURITY
FUNDS
High yield bonds can also help reduce volatility. In periods of steady interest
rates, the additional coupon interest is a benefit to total return. At June 30
high yield holdings made up slightly over 22% of the total portfolio assets.
PLANS FOR THE SECOND HALF
We may elect to extend the average duration of the portfolio slightly to stay in
line with other funds in our peer group. We believe that interest rates will
remain in a narrow range for the next few months, so we will keep our emphasis
on high grade corporate, mortgage-backed and high yield issues.
Steven M. Bowser
Portfolio Manager
(1)Performance figures are based on Class A shares and do not reflect deduction
of the sales charge. The Investment Manager waived its advisory fee for the six
month period ended June 30, 1998 and in the absence of such waiver the
performance quoted would be reduced.
Limited Maturity Series
6/30/98
Credit Quality Rating
[ A GRAPH ]
AAA 23.9%
AA 11.3%
A 27.3%
BBB 12.5%
BB 21.8%
B 3.2%
Limited Maturity Bond Series
Average Annual Total Return
as of June 30, 1998
<TABLE>
<CAPTION>
Class A Shares Class B Shares
<S> <C> <C> <C>
1 Year 4.09% 1 Year 3.21%
Since Inception 6.40% Since Inception 6.11%
(1-17-95) (1-17-95)
</TABLE>
The performance data above represents past performance which is not predictive
of future results. For Class A shares these figures reflect deduction of the
maximum sales charge of 4.75%. For Class B shares the figures reflect deduction
of the maximum contingent deferred sales charge, ranging from 5% in the first
year to 0% in the sixth and following years. Fee waivers reduced expenses of the
Fund and in the absence of such waiver, the performance quoted would be reduced.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
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7
<PAGE> 9
MANAGER'S COMMENTARY
- --------------------------------------------------------------------------------
August 15, 1998
SECURITY
FUNDS
[PHOTO] [PHOTO]
David Eshnaur Thomas A. Swank
Portfolio Manager Portfolio Manager
HIGH YIELD SERIES
High yield bonds were the best performing sector of the U.S. fixed income
markets in the first half of 1998. The strong upward movement relative to other
sectors was largely a result of an inflow of $11.5 billion in new cash. This is
27% more than in the same period last year, which was a record year. The high
yield market has now topped the $400 billion level, 33% above the 1997 year end
total.
PORTFOLIO PERFORMANCE
The High Yield Series modestly underperformed its peers, returning 4.17% over
the six months versus the Lipper peer group average of 4.42%.1 The benchmark
Lehman Brothers High Yield Index rose 4.50% in the same period. We maintain an
emphasis on higher quality BB and upper B rated issues in our portfolio. In
periods of declining interest rates lower-quality issues often outperform, but
when rates rise the higher-rated bonds are expected to hold their value better.
POSITIVE CONTRIBUTORS TO TOTAL RETURN
Our overweighting in sectors which performed well worked in our favor. In the
capital goods sector our Plastic Containers, Inc., bonds rose in price when the
company tendered for them as part of their overall refinancing process. Knoll
Inc., a manufacturer of office furniture, saw its bond prices climb as the
company benefited from a strong business environment.
The cable industry also fared well in the first half. We hold bonds issued by
Cablevision Systems, Comcast Cellular Holdings, Inc., Adelphia Communications
Corporation, and Diamond Cable U.S. in this sector. These companies, many of
which have heavy borrowings, gain when interest rates fall. Mergers and
acquisitions such as the AT&T/Telecommunications, Inc. union also drive up the
sector as a whole.
WHAT WE DIDN'T OWN HELPED, TOO
The High Yield Series was helped overall by having only small positions in some
sectors. Energy-related securities generally underperformed as oil prices
continued to fall. Some telecommunications bonds lost value, along with their
corresponding stock issues, as a result of the weak Asian economies. Many
chemicals declined as well, in sympathy with the closely-related energy sector.
THE HIGH YIELD MARKET OUTLOOK
We believe that the high yield market will continue to be volatile, since it
reacts to swings in both the bond and stock markets. Adding to the wide
fluctuations in the high yield arena as a whole is the volatility in emerging
markets-related issues, as world economies suffer the effects of the Asian
crisis. Fortunately, our portfolio has no exposure to emerging markets at this
time.
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8
<PAGE> 10
MANAGER'S COMMENTARY
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August 15, 1998
SECURITY
FUNDS
We plan to maintain our emphasis on the higher-quality issues. We note that
defaults on high yield issues moved up to 0.85% of total market value in the
first half, compared with 0.80% at the end of 1997. We believe the risk that
this implies justifies our somewhat more conservative approach to high yield
investing.
David Eshnaur and Thomas A. Swank
Portfolio Managers
(1) Performance figures are based on Class A shares and do not reflect deduction
of the sales charge. The Investment Manager waived its advisory fee for the six
month period ended June 30, 1998 and in the absence of such waiver the
performance quoted would be reduced
Investors should remember that while high yield bonds provide potentially higher
yields than many other types of bonds, they also present greater credit risk.
High Yield Series
6/30/98
Credit Quality Rating
[ A GRAPH ]
BBB 1%
BB 57%
B 42%
High Yield Series
Average Annual Total Return
as of June 30, 1998
<TABLE>
<CAPTION>
Class A Shares Class B Shares
<S> <C> <C> <C>
1 Year 5.56% 1 Year 4.88%
Since Inception 8.85% Since Inception 8.75%
(8-05-96) (8-05-96)
</TABLE>
The performance data above represents past performance which is not predictive
of future results. For Class A shares these figures reflect deduction of the
maximum sales charge of 4.75%. For Class B shares the figures reflect deduction
of the maximum contingent deferred sales charge, ranging from 5% in the first
year to 0% in the sixth and following years. Fee waivers reduced expenses of the
Fund and in the absence of such waiver, the performance quoted would be reduced.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
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9
<PAGE> 11
MANAGER'S COMMENTARY
- -------------------------------------------------------------------------------=
August 15, 1998
SECURITY
FUNDS
[PHOTO]
Marybeth Whyte
Portfolio Manager
SECURITY MUNICIPAL
BOND FUND
Beginning May 1, 1998, management of Security Municipal Bond Fund, formerly
Security Tax-Exempt Fund, was assumed by Salomon Brothers Asset Management, Inc.
(SBAM), acting as subadvisor to Security Management Company, LLC. SBAM is a
wholly-owned separate subsidiary of the Travelers Group, Inc., one of the
largest diversified financial services companies in the world. As of June 30,
1998, SBAM had $27 billion in assets under management, including $3.1 billion of
municipal assets. The investment professionals dedicated to managing the
portfolio have an average of fifteen years of experience in the industry.
FIRST HALF PERFORMANCE
During the first half of 1998 the Security Municipal Bond Fund generated a 2.01%
total return, slightly less than the 2.26% average of its Lipper peer group.1
This underperformance is not unusual in a period of change such as was
occasioned by the selection of a subadvisor for the fund.
Bond prices fluctuated during this period as the focus of the market shifted
between domestic economic growth and international concerns. Earlier in the year
the perceived strength of the domestic economy heightened the potential for a
resurgence in inflation. However, we expect that domestic economic growth will
be tempered due to a decline in international demand for U.S. exports.
Additionally, we believe that inflation is not a near-term threat to the bond
market and should remain benign. Fixed income securities also benefited from the
economic turmoil in Asia as investors sought U.S. Treasury bonds as a safe
haven.
MUNICIPAL NEW ISSUE VOLUME
Municipal bonds posted positive returns during the first half of 1998, but
failed to keep pace with advances in U.S. Treasuries. State and local
governments took advantage of relatively low nominal interst rates by issuing
more than $146 billion of debt. Municipal new issue volume for the first six
months of this year is 51% ahead of the similar period last year. Strong demand
from property and casualty insurance companies, corporations and mutual funds
helped absorb the supply.
The portfolio at June 30, 1998, consisted of 22 issues in 13 different states.
It had an average maturity of 14.6 years and a duration of slightly more than
eight years. The portfolio's credit quality remains high with an average
double-A rating. The industry sector weightings are well diversified, with the
greatest emphasis in education, water and sewer revenue, and general obligation
bonds.
The portfolio managers at Salomon Brothers Asset Management, Inc., are excited
to be a part of the Security Funds family. We look forward to our challenge of
providing attractive total returns and a solid income stream of Federally tax
exempt dividends to shareholders in the Municipal Bond Fund in the months and
years to come.
Marybeth Whyte
Portfolio Manager
(1) Performance figures are based on Class A shares and do not reflect deduction
of the sales charge.
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10
<PAGE> 12
MANAGER'S COMMENTARY
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August 15, 1998
SECURITY
FUNDS
A special meeting of the stockholders of Security Tax-Exempt Fund was held on
April 24, 1998. The following matters were voted on by the shareholders:
* A new sub-advisory contract between Security Management Company,
LLC, and Salomon Brothers Asset Management, Inc.(SBAM) was voted on.
The total number of eligible votes were 2,275,855. The results of the
votes are as follows: 1,370,352 in favor, 21,024 votes against and
112,202 votes abstained.
* A name change from Security Tax Exempt Fund to Security Municipal
Bond Fund. The results of the votes are as follows: 1,381,224 in
favor, 28,218 votes against and 94,136 votes abstained.
* A change in the fundamental policy to allow investment of the Fund's
assets in tax-exempt securities which may be subject to alternative
minimum tax. The results of the votes are as follows: 1,150,115 in
favor, 58,084 votes against, 184,774 broker non-votes and 110,607
votes abstained.
* A vote was taken to approve a Distribution plan for Class A shares.
The results of the votes are as follows: 1,115,408 shares in favor, 0
shares against, 184,773 shares broker non-votes and 98,596 shares
abstained.
* The last item voted on was an amendment to the Investment Advisory
Contract. The results of the votes are as follows: 1,115,408 shares in
favor, 109,453 shares against, 184,774 shares broker non-votes and
123,175 shares abstained.
Municipal Bond Fund
6/30/98
Credit Quality Rating
[ A GRAPH ]
AAA 57.6%
AA 35.3%
A 4.8%
BBB 2.3%
Municipal Bond Fund
Average Annual Total Return
as of June 30, 1998
<TABLE>
<CAPTION>
Class A Shares Class B Shares
<S> <C> <C> <C>
1 Year 2.51% 1 Year 1.41%
5 Years 3.72% Since Inception 1.98%
10 Years 5.95% (10-19-93)
</TABLE>
The performance data above represents past performance which is not
predictive of future results. For Class A shares these figures reflect
deduction of the maximum sales charge of 4.75%. For Class B shares the
figures reflect deduction of the maximum contingent deferred sales charge,
ranging from 5% in the first year to 0% in the sixth and following years. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
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11
<PAGE> 13
MANAGER'S COMMENTARY
- --------------------------------------------------------------------------------
August 15, 1998
SECURITY
FUNDS
SECURITY CASH FUND
Short-term interest rates on U.S. Treasury Bills generally declined about 0.25%
between the beginning of the year and the end of June, although the descent was
not a smooth one. Security Cash Fund has held its yield well despite the
volatility, generating a 2.38% return for the six-month period. This is in line
with the 2.42% average of its Lipper peer group.
CHARACTERISTICS OF THE PORTFOLIO
As usual, during the period we bought only investments which are rated in the
top tier by the major rating agencies, or which are Federal government or
government agency issues. We target an average maturity for the portfolio which
is within approximately ten days of that of the benchmark Money Fund Report
published by IBC Donoghue. At June 30 that benchmark maturity was 58 days, while
the Fund had an average of 54 days. We believe that the best strategy is not to
try to outguess the markets by dramatically lengthening or shortening the
average maturity. Instead, we maintain a "laddered" structure, with holdings
maturing at regular intervals over the life of the portfolio. This allows us to
adjust quickly should short-term interest rates change quickly.
ASSET SECTORS REPRESENTED IN THE PORTFOLIO
At June 30 the assets in the Cash Fund consisted of 82.4% commercial paper, 6.0%
Small Business Administration issues, and 11.2% Federal agency securities. We
have received approval from the Board of Directors of the Fund to purchase
securities known as "funding agreements" (also known as guaranteed investment
contracts). These agreements are contracts which are issued by insurance
companies, and are liabilities backed by the issuing company's general account
assets. These contracts are ranked on the same level as insurance policies. The
Fund will only purchase funding agreements which are in the top tier of ratings
by major rating agencies. The advantage to these agreements is that their yields
generally will be from ten to thirteen basis points (0.10% to 0.13%) higher than
those of commercial paper. We believe that their high quality and favorable
yield will be advantageous for use in the portfolio.
OUTLOOK FOR THE SECOND HALF
We expect interest rates on short-term investments to remain close to their
present levels for the coming months. We believe the Federal Reserve Open Market
Committee will be reluctant to raise rates because of the still-weak Asian
economies, but we feel that the U.S. economy remains too strong to allow rates
to go down. As usual, we will continue to monitor market conditions carefully,
and will remain ready to adjust portfolio holdings should economic conditions
warrant.
FIXED INCOME TEAM
The Security Cash Fund is neither insured nor guaranteed by the U.S. Government
and there is no assurance that the fund will be able to maintain a stable net
asset value of $1.00 per share.
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12
<PAGE> 14
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
June 30, 1998 (Unaudited)
Security Income Fund
Corporate Bond Series
<TABLE>
<CAPTION>
Principal
Amount or
Number Market
CORPORATE BONDS of Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
AUTOMOTIVE - 2.4%
Chrysler Corporation,
7.45% - 2027 .................................. $ 250,000 $ 250,625
Federal-Mogul Corporation,
7.875% - 2010 ................................. $1,200,000 1,324,500
----------
1,575,125
BANKS & CREDIT - 4.5%
Bank of New York, Inc.,
6.50% - 2003 .................................. $1,000,000 1,015,000
PNC Funding Corporation,
7.75% - 2004 .................................. $ 700,000 752,500
Washington Mutual Capital,
8.375% - 2002(1) .............................. $1,000,000 1,121,250
----------
2,888,750
BEVERAGE - 1.9%
Anheuser-Busch Companies,Inc.,
7.10% - 2007 .................................. $1,150,000 1,206,063
Brokerage - 3.7%
Morgan Stanley Group, Inc.,
7.25% - 2004 .................................. $1,050,000 1,089,375
SI Financing, Inc., 9.50% - 2026(1) .............. 48,000 1,293,000
----------
2,382,375
CAPITAL GOODS - BUILDING MACHINERY - 0.4%
AGCO Corporation,
8.5% - 2006 ................................... $ 250,000 257,188
CAPITAL GOODS - BUILDING MATERIALS - 0.4%
Titan Wheel International,
8.75% - 2007 .................................. $ 250,000 258,125
ENERGY - INDEPENDENT - 1.1%
Seagull Energy Corporation,
8.625% - 2005 ................................. $ 700,000 718,375
ENERGY - INTEGRATED - 2.4%
Occidental Petroleum,
6.24% - 2000 .................................. $ 500,000 501,875
Union Pacific Resources,
7.50% - 2026 .................................. $1,000,000 1,041,250
----------
1,543,125
ENERGY - OIL FIELD SERVICES - 1.8%
Transocean Offshore, Inc.,
8.00% - 2027 .................................. $1,000,000 1,155,000
ENTERTAINMENT - 1.5%
Paramount Communications,
7.50% - 2023 .................................. $1,000,000 971,250
<CAPTION>
PrincipaL
Amount or
Number Market
CORPORATE BONDS (continued) of Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL COMPANIES - 6.5%
American RE Capital,
8.50% - 20251 ............................... 23,000 $ 595,125
Associates Corporation, N.A.,
7.55% - 2007 ................................ $1,100,000 1,189,375
CB Richard Ellis Service,
8.875% - 2006 ............................... $ 250,000 246,875
Countrywide Capital Industries, Inc.,
8.00% - 20261 ............................... $1,000,000 1,063,750
General Electric Capital Corporation,
8.625% - 2008 ............................... $ 950,000 1,125,750
----------
4,220,875
FOOD - 2.3%
Archer-Daniels-Midland,
8.875% - 2011 ............................... $1,000,000 1,223,750
Chiquita Brands International, Inc.,
10.25% - 2006 ............................... $ 250,000 271,250
----------
1,495,000
GAMING - 2.2%
Boyd Gaming Corporation,
9.50% - 2007 ................................ $ 250,000 261,250
MGM Grand, Inc., 6.95% - 2005 .................. $ 600,000 596,250
Mirage Resorts, Inc.,
6.625% - 2007 ............................... $ 600,000 595,500
----------
1,453,000
HOME CONSTRUCTION - 0.4%
MDC Holdings, 8.375% - 2008 .................... $ 125,000 125,000
Toll Corporation, 7.75% - 2008 ................. $ 125,000 123,125
----------
248,125
INSURANCE - 1.5%
Hartford Life, Inc., 7.10% - 2007 .............. $ 925,000 963,156
MEDIA - CABLE - 7.5%
Century Communications,
8.375% - 2007 ............................... $ 250,000 257,500
Comcast Corporation,
9.125% - 2006 ............................... $ 600,000 643,500
CSC Holdings, Inc., 7.875% - 2018 .............. $ 250,000 264,375
Jones Intercable, Inc.,
7.625% - 2008 ............................... $ 250,000 253,750
Lenfest Communications,
10.50% - 2006 ............................... $ 250,000 291,250
Rogers Cablesystems,
9.625% - 2002 ............................... $ 750,000 800,625
Rogers Communications, Inc.,
9.125% - 2006 ............................... $ 425,000 430,313
Time Warner Entertainment,
10.15% - 2012 ............................... $ 880,000 1,169,300
Westinghouse Electric Company,
8.375% - 2002 ............................... $ 700,000 729,750
----------
4,840,363
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
13
<PAGE> 15
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
June 30, 1998 (Unaudited)
Security Income Fund
Corporate Bond Series(continued)
<TABLE>
<CAPTION>
Principal Market
CORPORATE BONDS (continued) Amount Value
- --------------------------------------------------------------------------------
<S> <C> <C>
MEDIA - NON-CABLE - 2.2%
Big Flower Press Holdings, Inc.,
8.875% - 2007 ............................. $ 250,000 $ 254,375
KIII Communications Corporation,
10.25% - 2004 ............................. 300,000 322,875
Valassis Communications,
9.55% - 2003 .............................. 750,000 840,000
----------
1,417,250
METALS - 0.8%
AK Steel, 10.75% - 2004 ...................... 500,000 531,250
RETAILERS - 2.7%
Lowe's Companies, Inc.,
6.70% - 2007 .............................. 850,000 875,500
Sears & Roebuck Company,
6.41% - 2001 .............................. 500,000 503,750
Specialty Retailers, Inc.,
8.50% - 2005 .............................. 125,000 128,750
Zale's Corporation, 8.50% - 2007 ............. 250,000 255,625
----------
1,763,625
SERVICES - 0.9%
Loewen Group International, Inc.,
8.25% - 2003 .............................. 550,000 568,563
TECHNOLOGY - 0.8%
Dell Computer Corporation,
6.55% - 2008 .............................. 500,000 506,250
Telecommunications - 4.1%
Comcast Cellular Holdings, Inc.,
9.50% - 2007 .............................. 150,000 156,563
GTE Corporation, 6.46% - 2008 ................ 800,000 804,000
New Jersey Bell, 6.625% - 2008 ............... 1,000,000 1,006,250
Southwestern Bell,
6.625% - 2007 ............................. 675,000 697,781
----------
2,664,594
TRANSPORTATION - AIRLINES - 3.9%
Southwest Airlines Company,
7.875% - 2007 ............................. 1,075,000 1,190,563
United Airlines, 11.21% - 2014 ............... 950,000 1,344,250
----------
2,534,813
TRANSPORTATION - OTHER - 0.4%
Allied Holdings, Inc.,
8.625% - 2007 ............................. 250,000 255,625
UTILITIES - ELECTRIC - 0.8%
AES Corporation, 10.25% - 2006 ............... 500,000 543,750
UTILITIES - NATURAL GAS - 2.3%
MCN Investment Corporation,
6.23% - 2003 .............................. 50,000 49,938
Tennessee Gas Pipeline,
7.50% - 2017 .............................. 1,300,000 1,410,500
-----------
1,460,438
YANKEE - CORPORATE - 10.4%
ABN AMRO Bank NV,
7.55% - 2006 .............................. $ 1,000,000 $ 1,083,750
Abbey National PLC,
6.69% - 2005 .............................. 1,125,000 1,151,719
BCH Cayman Islands,
7.70% - 2006 .............................. 1,000,000 1,070,000
Panamerican Beverages, Inc.,
8.125% - 2003 ............................. 1,200,000 1,248,000
Petroleum Geo-Services,
7.50% - 2007 .............................. 1,150,000 1,223,313
Santander Financial Issuances, Ltd.,
7.00% - 2006 .............................. 900,000 934,875
-----------
6,711,657
YANKEE - CANADIAN - 1.8%
Quebecor Printing Capital,
7.25% - 2007 .............................. 1,100,000 1,153,625
-----------
Total corporate bonds - 71.6% ................ 46,287,335
MORTGAGE BACKED SECURITIES
U.S. GOVERNMENT AGENCIES - 9.4%
Federal Home Loan Mortgage Corporation,
FHR 112 H, 8.80% - 2020 CMO .................. 300,393 304,382
FHR 1311 J, 7.50% - 2021 CMO .................. 1,050,000 1,078,266
FHR 1930 AB, 7.50% - 2023 CMO ................. 1,143,582 1,160,233
Federal National Mortgage Association,
FNMA, 5.75% - 2008 ............................ 1,000,000 994,810
FNR 1994-79 B,
7.00% - 2019 CMO .......................... 1,100,000 1,117,831
FNR 1990-52 D,
9.30% - 2019 CMO .......................... 388,036 393,880
FNR 1990-108 G,
7.00% - 2020 CMO .......................... 1,000,000 1,009,610
---------
6,059,012
U.S. GOVERNMENT SECURITIES - 6.4%
Government National Mortgage Association,
GNMA 313107, 7% - 2022 ........................ 947,186 965,143
GNMA 352022, 7% - 2023 ........................ 906,505 920,510
GNMA 369303, 7% - 2023 ........................ 978,903 993,957
GNMAII 2445, 8% - 2027 ........................ 500,332 515,957
GNR 1997-10 B,
7.50% - 2019 CMO .......................... 750,000 763,380
---------
4,158,947
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE> 16
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
June 30, 1998 (Unaudited)
Security Income Fund
Corporate Bond Series(continued)
<TABLE>
<CAPTION>
MORTGAGE BACKED SECURITIES PRINCIPAL MARKET
(CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
NON-AGENCY SECURITIES - 3.5%
Chase Capital Mortgage Securities
Company, 1997-1B,
7.37% - 2007 CMO ........................ $ 1,500,000 $ 1,597,969
General Electric Capital Mortgage
Services, Inc., 1992-7A,
7.45% -2006 ............................. 674,329 658,806
-----------
2,256,775
-----------
Total mortgage backed securities -19.3% ........ 12,474,734
GOVERNMENT SECURITIES
U.S. GOVERNMENT SECURITIES - 7.6%
U.S. Treasury Bond,
6.625% - 2027 ............................... 1,000,000 1,129,070
U.S. Treasury Note,
6.50% - 2006 ................................ 3,050,000 3,236,050
U.S. Department of Housing and
Urban Development,
6.93% - 2013 ............................ 490,000 518,309
-----------
Total government securities - 7.6% ............................. 4,883,429
-----------
Total investments - 98.5% ...................................... 63,645,498
Cash and other assets,
less liabilities - 1.5% ..................................... 964,151
-----------
Total net assets - 100.0% ...................................... $64,609,649
===========
SECURITY INCOME FUND
U.S. GOVERNMENT SERIES
U.S. Government & Government Agency Securities
- ----------------------------------------------
FEDERAL HOME LOAN MORTGAGE
CORPORATION - 5.8%
7.125% - 2001 ........................... $ 700,000 $ 709,394
8.29% - 2015 ............................ 150,000 187,157
----------
896,551
FEDERAL NATIONAL MORTGAGE
ASSOCIATION - 16.6%
7.40% - 2004 ............................ 600,000 649,950
7.49% - 2005 ............................ 285,000 312,610
7.65% - 2005 ............................ 250,000 276,190
7.875% - 2005 ........................... 500,000 558,240
8.10% - 2019 ............................ 100,000 126,068
8.28% - 2025 ............................ 500,000 656,895
----------
2,579,953
FINANCING CORPORATION - 4.6%
9.65% - 2018 ............................ 500,000 715,625
U.S. GOVERNMENT & GOVERNMENT PRINCIPAL MARKET
AGENCY SECURITIES (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 25.6%
GNMA #1260 7.00% - 2023 ................. $ 209,869 $ 212,222
GNMA #328618 7.00% - 2023 ............... 209,869 248,645
GNMA #347017 7.00% - 2024 ............... 478,921 486,377
GNMA #371006 7.00% - 2024 ............... 270,105 274,267
GNMA #371012 7.00% - 2024 ............... 490,055 497,670
GNMA II #1849 8.50% - 2024 ............. 375,202 394,548
GNMA #411643 7.75% - 2025 ............... 551,546 568,749
GNMA II #2270 8.00% - 2026 ............. 566,902 584,402
GNMA II #9365 8.25% - 2026 ............. 199,688 208,700
GNMA #365608 7.50% - 2034 ............... 519,227 530,889
----------
4,006,469
PRIVATE EXPORT FUNDING CORPORATION - 3.1%
6.31% - 2004 ................................ 100,000 103,375
7.01% - 2004 ................................ 350,000 373,188
-----------
476,563
STUDENT LOAN MARKETING ASSOCIATION - 3.2%
9.25% - 2004 ................................ 420,000 493,038
U.S. TREASURY NOTES - 30.6%
5.50% - 2003 ................................ 900,000 899,370
6.50% - 2006 ................................ 3,650,000 3,872,650
-----------
4,772,020
U.S. TREASURY BONDS - 7.7%
8.75% - 2008 ................................ 600,000 684,714
6.00% - 2026 ................................ 500,000 520,390
-----------
1,205,104
-----------
Total investments - 97.2% ...................... 15,145,323
Cash and other assets,
less liabilities - 2.8% ..................... 435,924
-----------
Total net assets - 100.0% ...................... $15,581,247
===========
SECURITY INCOME FUND
LIMITED MATURITY BOND SERIES
CORPORATE BONDS
- ---------------
AUTOMOTIVE - 0.8%
Chrysler Corporation,
7.45% - 2027 ............................ $ 50,000 $ 55,187
BANKING - 3.3%
Bank of New York, Inc.,
6.50% - 2003 ............................ 100,000 101,500
First Union Corporation,
8.125% - 2002 ........................... 110,000 117,562
--------
219,062
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE> 17
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1998
SECURITY INCOME FUND
LIMITED MATURITY BOND SERIES (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
NUMBER MARKET
CORPORATE BONDS (CONTINUED) 0F SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
BEVERAGE - 1.5%
Anheuser-Busch Companies, Inc.,
7.10% - 2007 .................................... $100,000 $104,875
BROKERAGE - 3.4%
Morgan Stanley Group, Inc.,
7.25% - 2004 .................................... $100,000 103,750
SI Financing Inc., 9.50% - 2026(1) ................. 4,560 122,835
--------
226,585
CAPITAL GOODS - BUILDING MACHINERY - 0.8%
AGCO Corporation,
8.50% - 2006 .................................... $ 25,000 25,719
Columbus McKinnon Corporation,
8.50% - 2008 .................................... $ 25,000 24,625
--------
50,344
CAPITAL GOODS - BUILDING MATERIALS - 0.4%
International Comfort Products,
8.625% - 2008 ................................... $ 25,000 24,875
CONSUMER CYCLICALS - OTHER - 0.4%
American ECO Corporation,
9.625% - 2008 ................................... $ 25,000 25,125
CONSUMER PRODUCTS - 2.0%
Chattem, Inc., 8.875% - 2008 ....................... $ 25,000 24,875
Shop Vac Corporation,
10.625% - 2003 .................................. $ 100,000 109,500
--------
134,375
ENERGY - ELECTRIC - 2.3%
Consolidated Edison Corporation,
6.625% - 2002 ................................. $ 150,000 153,000
ENERGY - INDEPENDENT - 0.8%
Seagull Energy Corporation,
8.625% - 2005 ................................. $ 50,000 51,313
ENERGY - OTHER - 0.4%
P&L Coal Holdings Corporation,
8.875% - 2008 ................................. $ 25,000 25,719
FINANCIAL COMPANIES - 10.0%
American RE Capital,
8.50% - 2025(1) ............................... 3,900 100,913
Associates Corporation, N.A.,
7.55% - 2007 .................................. $ 100,000 108,125
CB Richard Ellis Service,
8.875% - 2006 ................................. $ 25,000 24,687
General Electric Capital Corporation,
8.625% - 2008 ................................. $ 100,000 118,500
Household Financial Corporation,
8.0% - 2004 ................................... $ 150,000 162,562
International Lease Finance Corporation,
8.25% - 2000 .................................. $ 150,000 155,250
--------
670,037
PRINCIPAL MARKET
CORPORATE BONDS (CONTINUED) AMOUNT VALUE
- -------------------------------------------------------------------------------
FINANCE - OTHER - 1.7%
B.F. Saul REIT, 9.75% - 2008 ....................... $ 13,000 $ 12,838
Equity Office Properties, Ltd., REIT,
6.625% - 2005 ................................... 100,000 100,375
--------
113,213
FOOD - 3.0%
Archer-Daniels-Midland Company,
8.875% - 2011 ................................... 100,000 122,375
Cargill Corporation,
6.15% - 2008 .................................... 75,000 74,719
--------
197,094
GAMING - 2.8%
Boyd Gaming Corporation,
9.50% - 2007 .................................... 25,000 26,125
Empress Entertainment,
8.125% - 2006 ................................... 25,000 25,062
MGM Grand, Inc., 6.95% - 2005 ...................... 75,000 74,531
Mirage Resorts, Inc.,6.625% - 2007 ................. 65,000 64,512
--------
190,230
HEALTH CARE - 0.4%
Tenet Healthcare, 8.125% - 2008 .................... 25,000 25,125
HOME CONSTRUCTION - 0.4%
MDC Holdings, 8.375% - 2008 ........................ 12,000 12,000
Toll Corporation,7.75% - 2008 ...................... 13,000 12,805
--------
24,805
INSURANCE - 1.5%
Hartford Life, Inc.,
7.10% - 2007 .................................... 100,000 104,125
MEDIA - CABLE - 5.7%
Adelphia Communications,
8.375% - 2008 ................................... 25,000 25,125
Century Communications,
8.375% - 2007 ................................... 25,000 25,750
Comcast Corporation, 9.125% - 2006 ................. 25,000 26,813
Jones Intercable, Inc.,
7.625% - 2008 ................................... 25,000 25,375
Lenfest Communications,
10.50% - 2006 ................................... 25,000 29,125
Rogers Communications, Inc.,
9.125% - 2006 ................................... 75,000 75,938
Time-Warner Entertainment
Corporation, 10.15% - 2012 ...................... 50,000 66,437
Westinghouse Electric Company,
8.375% - 2002 ................................... 100,000 104,250
--------
378,813
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE> 18
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1998
SECURITY INCOME FUND
LIMITED MATURITY BOND SERIES (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
CORPORATE BONDS (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
MEDIA - NON-CABLE - 4.0%
Big Flower Press Holdings, Inc.,
8.875% - 2007 ............................... $ 25,000 $ 25,438
Heritage Media Corporation,
8.75% - 2006 ................................ 100,000 106,750
KIII Communications Corporation,
10.25% - 2004 ............................... 75,000 80,719
Valassis Communications,
9.55% - 2003 ................................ 25,000 28,000
Viacom, Inc., 8.00% - 2006 ..................... 25,000 25,750
________
266,657
METALS - 0.7%
Ameristeel Corporation,
8.75% - 2008 ................................ 25,000 25,000
WHX Corporation, 8.5% - 2006 ................... 25,000 25,437
________
50,437
REFINING - 2.5%
Vastar Resources, Inc.,
8.75% - 2005 ................................ 150,000 168,750
RETAILERS - 5.7%
Lowe's Companies, Inc.,
6.70% - 2007 ................................ 100,000 103,000
Sears & Roebuck Company,
6.41% - 2001 ................................ 150,000 151,125
Specialty Retailers, Inc.,
8.50% - 2005 ................................ 25,000 25,750
Zale's Corporation, 8.50% - 2007 ............... 100,000 102,250
________
382,125
SERVICES - 0.8%
Loewen Group International, Inc.,
8.25% - 2003 ................................ 50,000 51,687
TELECOMMUNICATIONS - 5.3%
Centennial Cellular,
8.75% - 2001 ................................ 100,000 104,000
Comcast Cellular Holdings, Inc.,
9.50% - 2007 ................................ 25,000 26,094
Mastec, Inc., 7.75 - 2008 ...................... 25,000 23,875
New Jersey Bell, 6.625% - 2008 ................. 100,000 100,625
Southwestern Bell,
6.625% - 2007 ............................... 100,000 103,375
________
357,969
TEXTILES - 0.4%
Westpoint Steven,
7.875% - 2008 ............................. 25,000 24,937
TOBACCO PRODUCTS - 1.5%
Dimon, Inc., 8.875% - 2006 ................... 50,000 51,188
Standard Commercial Tobacco
Corporation, 8.875% - 2005 ................ 50,000 50,000
__________
101,188
TRANSPORTATION - AIRLINES - 3.2%
Southwest Airlines Company,
7.875% - 2007 ............................. $ 100,000 $ 110,750
United Airlines, 11.21% - 2014 ............... 75,000 106,125
__________
216,875
TRANSPORTATION - OTHER - 0.4%
Allied Holdings, Inc.,
8.625% - 2007 ............................. 25,000 25,563
UTILITIES - NATURAL GAS - 2.3%
MCN Investment Corporation,
6.23% - 2003 .............................. 150,000 149,812
YANKEE - CORPORATE - 4.8%
ABN AMRO Bank NV,
7.55% - 2006 .............................. 100,000 108,375
Den Danske Bank, 7.40% - 2010 ................ 100,000 106,625
Panamerican Beverages, Inc.,
8.125% - 2003 ............................. 100,000 104,000
__________
319,000
YANKEE - CANADIAN - 1.6%
Quebecor Printing Capital,
7.25% - 2007 .............................. 100,000 104,875
__________
Total corporate bonds - 74.8% ................ 4,993,777
MORTGAGE BACKED SECURITIES
U.S. GOVERNMENT AGENCIES - 10.7%
Federal Home Loan Mortgage Corporation,
FHR 1102 G, 8.00% - 2020 CMO .................... 82,432 81,109
FHR 1104 K, 8.50% - 2020 CMO .................... 32,041 32,300
FHR 1311 J, 7.50% - 2021 CMO .................... 100,000 102,692
FHR 1930 AB, 7.50% - 2023 CMO ................... 84,087 85,311
FHR 42 K, 8.00% - 2024 CMO ...................... 186,000 189,990
Federal National Mortgage Association,
FNR 1992-98 PJ,
7.50% - 2019 CMO ............................ 118,000 118,820
FNR 1992-143 J,
7.00% - 2020 CMO ............................ 100,000 99,933
_______
710,155
U.S. GOVERNMENT SECURITIES - 3.4%
Government National Mortgage Association,
GNMA 369303,
7.00% - 2023 ................................ 97,890 99,396
GNMA II 2445,
8.00% - 2027 ................................ 120,080 123,830
_______
223,226
</TABLE>
See accompanying notes
- --------------------------------------------------------------------------------
17
<PAGE> 19
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1998
SECURITY INCOME FUND
LIMITED MATURITY BOND SERIES (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MORTGAGE BACKED SECURITIES (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
NON-AGENCY SECURITIES - 2.9%
General Electric Capital Mortgage
Services, Inc., 1992-7A A6
7.45% - 2006 ................................... $ 60,134 $ 61,201
Sears Mortgage Securities 1994-14 T3,
8.5% - 2022 CMO ................................. 82,821 85,239
Securitized Multiple Assets Rated
Trust 1998-1, 7.45% - 2006 ...................... 48,794 48,870
__________
195,310
__________
Total mortgage backed
securities - 17.0% .............................. 1,128,691
GOVERNMENT SECURITIES
U.S. GOVERNMENT SECURITIES - 2.3%
U.S. Treasury Note, 6.50% - 2006 ................... 100,000 106,100
U.S. Department of Housing and
Urban Development,
6.93% - 2013 .................................... 50,000 52,889
CANADIAN GOVERNMENT AGENCIES - 2.6%
Province of Quebec,
8.625% - 2005 ................................... 150,000 170,063
__________
Total government securities - 4.9% ................. 329,052
__________
Total investments - 96.7% .......................... 6,451,520
Cash and other assets, less
liabilities - 3.3% .............................. 222,481
__________
Total net assets - 100.0% .......................... $6,674,001
==========
SECURITY INCOME FUND
HIGH YIELD SERIES
CORPORATE BONDS
AEROSPACE/DEFENSE - 2.0%
Burke Industries, Inc., 10.0% - 2007 ............. $ 75,000 $ 75,937
Sequa Industries, Inc.,
9.375% - 2003 ................................. 100,000 104,125
________
180,062
AUTOMOTIVE - 2.5%
Breed Technologies, Inc.,
9.25% - 2008 .................................. 150,000 148,125
Federal-Mogul Corporation,
7.875% - 2010 ................................. 75,000 75,188
________
223,313
SECURITY INCOME FUND
HIGH YIELD SERIES
PRINCIPAL
AMOUNT OR
NUMBER MARKET
CORPORATE BONDS (CONTINUED) 0F SHARES VALUE
- --------------------------------------------------------------------------------
BANKING - 4.0%
Bay View Capital Corporation,
9.125% - 2007 ............................... $ 100,000 $102,750
FCB/NC Capital, 8.05% - 2028 ................... $ 100,000 103,750
Homeside, Inc., 11.25% - 2003 .................. $ 125,000 148,125
________
354,625
BEVERAGES - 1.2%
Delta Beverage Group,
9.75% - 2003 ................................ $ 100,000 104,750
BROKERAGE - 1.5%
SI Financing, 9.50% - 2026(1) .................. 5,000 134,687
BUILDING MATERIALS - 2.7%
International Comfort Products,
8.625% - 2008 ............................... $ 125,000 124,375
Knoll, Inc., 10.875% - 2006 .................... $ 100,000 113,750
________
238,125
CHEMICALS - 1.2%
Envirodyne Industries, Inc.,
12.0% - 2000 ................................ $ 100,000 106,250
CONSUMER CYCLICAL - OTHER - 1.4%
American ECO Corporation,
9.625% - 2008 ............................... $ 125,000 125,625
CONSUMER PRODUCTS - 3.7%
Chattem, Inc., 8.875% - 2008 ................... $ 125,000 124,375
Revlon Consumer Products,
8.125% - 2006 ............................... $ 100,000 99,375
Shop Vac Corporation,
10.625% - 2003 .............................. $ 100,000 109,500
________
333,250
CONSTRUCTION MACHINERY - 3.7%
AGCO Corporation,
8.50% - 2006 ................................ $ 100,000 102,875
Columbus McKinnon Corporation,
8.50% - 2008 ................................ $ 125,000 123,125
Titan Wheel International, Inc.,
8.75% - 2007 ................................ $ 100,000 103,250
________
329,250
ELECTRIC - 2.4%
AES Corporation, 10.25% - 2006 ................. $ 100,000 108,750
Cal Energy Company, Inc.,
9.50% - 2006 ................................ $ 100,000 108,125
________
216,875
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
18
<PAGE> 20
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1998
SECURITY INCOME FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
PRINCIPAL MARKET
CORPORATE BONDS (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
ENERGY - INDEPENDENT - 3.8%
COHO Energy, Inc.,
8.875% - 2007 ................................. $150,000 $142,500
Seagull Energy Corporation,
8.625% - 2005 ................................. 75,000 76,968
Southwest Royalties, Inc.,
10.50% - 2004 ................................. 150,000 124,500
________
343,968
ENERGY - OTHER - 2.0%
AEI Holdings, 10.00% - 2007 ...................... 100,000 98,750
P & L Coal Holdings Corporation,
8.875% - 2008 ................................. 75,000 77,156
________
175,906
ENTERTAINMENT - 0.9%
Premier Parks, 9.75% - 2007 ...................... 75,000 81,563
FINANCE - OTHER - 0.8%
B.F. Saul REIT, 9.75% - 2008 ..................... 75,000 74,063
FINANCIAL COMPANIES - 1.2%
Dollar Financial Group, Inc.,
10.875% - 2006 ................................ 100,000 107,750
FOOD AND BEVERAGES - 4.4%
Carrols Corporation,
11.50% - 2003 ................................. 175,000 183,531
Chiquita Brands International, Inc.,
10.25% - 2006 ................................. 100,000 108,500
Nash Finch Company,
8.50% - 2008 .................................. 100,000 99,250
________
391,281
GAMING - 4.7%
Empress Entertainment,
8.125% - 2006 ................................. 100,000 100,250
Hard Rock Hotel, Inc.,
9.25% - 2005 .................................. 75,000 76,500
MGM Grand, Inc., 6.95% - 2005 .................... 125,000 124,219
Mirage Resorts, Inc.,
6.625% - 2005 ................................. 125,000 124,062
________
425,031
HEALTH CARE - 3.6%
Multicare Companies, Inc.,
9.0% - 2007 ................................... 75,000 73,688
Packard Bioscience Company,
9.375% - 2007 ................................. 80,000 78,000
Prime Medical Services,
8.75% - 2008 .................................. 75,000 73,406
Tenet Healthcare Corporation,
8.125% - 2008 ................................. 100,000 100,500
________
325,594
PRINCIPAL MARKET
CORPORATE BONDS (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
HOME CONSTRUCTION - 1.7%
Hovnanian Enterprise,
9.75% - 2005 .................................. $100,000 $ 99,000
Toll Corporation, 7.75% - 2007 ................... 50,000 49,250
________
148,250
MEDIA - CABLE - 8.5%
Adelphia Communications Corporation,
8.375% - 2008 ................................. 50,000 50,250
Century Communications,
8.375% - 2007 ................................. 75,000 77,250
Century Communications,
9.50% - 2005 .................................. 100,000 108,250
CSC Holdings, Inc.,
7.875% - 2018 ................................. 25,000 26,438
Diamond Cable U.S.,
9.125% - 2008 ................................. 100,000 104,000
Jones Intercable, Inc.,
7.625% - 2008 ................................. 100,000 101,500
Lenfest Communications,
10.50% - 2006 ................................. 100,000 116,500
Rogers Cablesystems,
9.625% - 2002 ................................. 100,000 106,750
Rogers Communications, Inc.,
9.125% - 2006 ................................. 70,000 70,875
________
761,813
MEDIA - NONCABLE - 4.7%
Allbritton Communications Company,
9.75% - 2007 .................................. 75,000 82,500
Big Flower Press Holdings, Inc.,
8.875% - 2007 ................................. 75,000 76,312
Golden Books Publishing, Inc.,
7.65% - 2002 .................................. 100,000 78,000
Heritage Media Corporation,
8.75% - 2006 .................................. 100,000 106,750
Hollinger International Publishing,
8.625% - 2005 ................................. 25,000 26,063
K-III Communications Corporation,
10.25% - 2004 ................................. 50,000 53,813
________
423,438
METALS - 3.7%
Ameristeel Corporation,
8.75% - 2008 .................................. 100,000 100,000
Simcala, Inc., 9.625% - 2006 ..................... 100,000 74,250
Wheeling Pittsburgh Corporation,
9.25% - 2007 .................................. 100,000 102,500
WHX Corporation, 10.50% - 2005 ................... 50,000 50,875
________
327,625
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
19
<PAGE> 21
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1998
SECURITY INCOME FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
PRINCIPAL MARKET
CORPORATE BONDS (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
PACKAGING & CONTAINERS - 4.5%
Huntsman Packaging Corporation,
9.125% - 2007 ............................... $ 125,000 $124,375
Indesco International, Inc.,
9.75% - 2008 ................................ 150,000 147,750
Plastic Containers, Inc.,
10.0% - 2006 ................................ 125,000 134,375
________
406,500
REFINING - 3.1%
Crown Central Petroleum,
10.875% - 2005 .............................. 140,000 148,400
Giant Industries, Inc.,
9.0% - 2007 ................................. 125,000 127,812
________
276,212
RETAILERS - 3.5%
Cole National Group,
9.875% - 2006 ............................... 100,000 108,000
Specialty Retailers, Inc.,
8.50% - 2005 ................................ 100,000 103,000
Zale's Corporation,
8.50% - 2007 ................................ 100,000 102,250
________
313,250
SUPERMARKETS - 1.0%
Southland Corporation,
4.50% - 2004 ................................ 100,000 80,500
TELECOMMUNICATIONS - 9.6%
Centennial Cellular,
8.875% - 2001 ............................... 100,000 104,000
Comcast Cellular Holdings, Inc.,
9.50% - 2007 ................................ 125,000 130,469
Intermedia Communications,
8.50% - 2008 ................................ 125,000 125,000
Mcleodusa, Inc.,
8.375% - 2008 ............................... 150,000 150,375
MJD Communications, Inc.,
9.50% - 2008 ................................ 150,000 153,562
RCN Corporation,
10.0% - 2007 ................................ 100,000 102,750
Satelites Mexicanos, Inc.,
10.125% - 2004 .............................. 100,000 97,750
________
863,906
TEXTILES - 2.2%
Delta Mills, Inc., 9.625% - 2007 ............... 125,000 122,968
Westpoint Stevens, Inc.,
7.875% - 2008 ............................... 75,000 74,813
________
197,781
PRINCIPAL MARKET
CORPORATE BONDS (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
TOBACCO - 1.4%
Dimon, Inc., 8.875% - 2006 ..................... $ 50,000 $ 51,188
Standard Commerical Tobacco
Corporation, 8.875% - 2005 .................. $ 75,000 75,000
__________
126,188
TRANSPORTATION - OTHER - 2.4%
Allied Holdings, Inc.,
8.625% - 2007 ............................... $ 75,000 76,688
Teekay Shipping Corporation,
8.32% - 2008 ................................ $ 135,000 139,387
__________
216,075
__________
Total corporate bonds - 94.0% .................................. 8,413,506
PREFERRED STOCKS
BANKS AND CREDIT - 1.5%
California Federal Bank,
9.12% .......................................... 4,950 134,888
MEDIA - CABLE - 0.7%
CSC Holdings, Inc., ............................ 571 64,718
MEDIA - NONCABLE - 0.8%
Primedia Inc., 10.00% - 2008 ................... 700 73,850
__________
Total preferred stocks - 3.0% .................................. 273,456
__________
Total investments - 97.0% ...................................... 8,686,962
Cash and other assets,
less liabilities 3.0% .......................................... 278,105
__________
Total net assets - 100.0% ...................................... $8,965,067
==========
SECURITY MUNICPAL BOND FUND
MUNICIPAL BONDS
- --------------------------------------------------------------------------------
CALIFORNIA - 9.7%
Los Angeles County, California Metro
Authority, 5.625% - 2018 ...................... $ 1,000,000 $1,032,970
Los Angeles, California Wastewater
System Revenue, 6.00% - 2014 .................. 1,100,000 1,189,859
__________
2,222,829
GEORGIA - 6.9%
Fulton County, Georgia School District,
5.25% - 2021 .................................. 1,500,000 1,569,870
ILLINOIS - 9.0
Winnebago County,Illinois School
District No. 122, 0% - 2015 ................... 2,155,000 982,680
DuPage County,Illinois Stormwater
Project Refunding, 5.60% - 2021 ............... 1,000,000 1,066,470
__________
2,049,150
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
20
<PAGE> 22
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1998
SECURITY MUNICPAL BOND FUND - (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MUNICIPAL BONDS (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
MISSOURI - 2.3%
Kansas City,Missouri Port Authority
Riverfront, 5.75% - 2005 ...................... $ 500,000 $ 535,080
NEVADA - 9.2%
Henderson Nevada Parks and
Recreation, 5.875% - 2004 ..................... 1,000,000 1,082,590
Clark County, Nevada School District,
Series A, 5.50% - 2016 ........................ 1,000,000 1,027,850
___________
2,110,440
NEW JERSEY - 4.9%
North Brunswick Township, New Jersey
Board of Education,
6.30% - 2013 .................................. 1,000,000 1,112,400
NEW YORK - 4.8%
New York State Environmental Facilities
Corporation Pollution Control
Revenue, 5.75% - 2009 ......................... 1,000,000 1,099,910
NORTH CAROLINA - 2.6%
North Carolina Medical Care
Community Healthcare,
variable rate - 2026 .......................... 600,000 600,000
OHIO - 9.3%
Orville, Ohio Electric System Revenue
Bond, 5.00% - 2010 ............................ 1,000,000 1,026,050
Ohio State Public Facilities Series II-B,
5.00% - 2012 .................................. 1,100,000 1,106,446
___________
2,132,496
PENNSYLVANIA - 9.1%
Allegheny County, Pennsylvania,
5.10% - 2006 .................................. 1,000,000 1,046,530
Pennsylvania State,
5.00% - 2006 .................................. 1,000,000 1,040,540
___________
2,087,070
RHODE ISLAND - 4.8%
Rhode Island General Obligation,
5.30% - 2008 .................................. 1,030,000 1,089,606
TEXAS - 13.6%
University of Texas,
4.80% - 2009 .................................. 1,000,000 1,016,800
Houston, Texas Water & Sewer
System Revenue, Series A,
6.20% - 2020 .................................. 1,000,000 1,120,910
Bell County, Texas Health Facilities
Development, 5.00% - 2017 ..................... 1,000,000 976,440
___________
3,114,150
PRINCIPAL MARKET
MUNICIPAL BONDS AMOUNT VALUE
- --------------------------------------------------------------------------------
VIRGINIA - 3.7%
Petersburg, Virginia Hospital Authority,
4.00% - 20174 ................................. $ 850,000 $ 850,000
WASHINGTON - 14.9%
Washington Public Power Supply
System Revenue Nuclear Project #2,
6.30% - 2012 .................................. 1,000,000 1,134,120
King County, Washington Sewer
Revenue, Series A,
6.25% - 2034 .................................. 1,000,000 1,092,940
Island County, Washington School
District South Whidbey,
6.75% - 2007 .................................. 1,000,000 1,173,670
___________
3,400,730
OTHER TERRITORIES - 4.8%
Puerto Rico Public Buildings Authority
Guaranteed Public Education and
Health Facilities, 5.70% - 2009 ............... 1,000,000 1,104,150
___________
Total investments - 109.6% ....................... 25,077,881
Liabilities, less cash and
other assets, - (9.6%) ........................ (2,203,110)
___________
Total net assets - 100.0% ........................ $22,874,771
===========
SECURITY CASH FUND
COMMERCIAL PAPER
- ----------------
AEROSPACE/DEFENSE - 0.6%
Rockwell International Corporation,
5.50%, 7-31-98 ................................ $ 440,000 $ 437,983
BROKERAGE - 9.9%
Bear Stearns Companies, Inc.,
5.50%, 9-10-98 ................................ 3,600,000 3,560,950
Merrill Lynch & Company, Inc., ................... 3,580,000
5.50%, 7-02-98 ................................ 249,962
5.53%, 9-23-98 ................................ 493,548
5.53%, 9-25-98 ................................ 325,641
5.52%, 10-30-98 ............................... 2,453,616
___________
7,083,717
BUSINESS SERVICES - 4.4%
General Electric Capital Corporation, ............ 3,146,000
5.53%, 7-30-98 ................................ 2,488,863
5.50%, 9-02-98 ................................ 639,782
___________
3,128,645
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
21
<PAGE> 23
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1998 (UNAUDITED)
SECURITY CASH FUND (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
COMMERCIAL PAPER (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
ELECTRIC UTILITIES - 18.3%
Carolina Power & Light Company, .............. $1,671,000
5.50%, 7-07-98 ............................ $ 470,568
5.51%, 8-28-98 ............................ 1,189,347
Florida Power Corporation, ................... 3,010,000
5.50%, 7-09-98 ............................ 2,037,507
5.52%, 8-11-98 ............................ 963,902
Georgia Power Company,
5.52%, 7-21-98 ............................ 1,224,000 1,220,246
Idaho Power Company,
5.50%, 7-10-98 ............................ 2,300,000 2,296,838
New England Power Company, ................... 1,269,000
5.52%, 7-17-98 ............................ 997,547
5.55%, 7-24-98 ............................ 268,046
Progress Capital Holdings, Inc., ............. 3,609,000
5.52%, 7-08-98 ............................ 2,996,780
5.52%, 7-16-98 ............................ 607,599
__________
13,048,380
ELECTRONICS - 5.2%
AVNET, Inc., ................................. 3,700,000
5.52%, 7-17-98 ............................ 2,493,867
5.52%, 8-14-98 ............................ 1,191,904
__________
3,685,771
FOOD PROCESSING - 2.8%
General Mills, 5.49%, 7-13-98 ................ 2,000,000 1,996,340
HARDWARE & TOOLS - 5.9%
Sherwin-Williams Company,
5.50%, 8-14-98 ............................ 1,000,000 993,278
Stanley Works, Inc.,
5.51%, 7-28-98 ............................ 3,230,000 3,216,652
__________
4,209,930
METALS & MINERALS - 2.9%
Aluminum Company of America,
5.52%, 8-27-98 .............................. 2,100,000 2,081,646
NATURAL GAS - 9.4%
Consolidated Natural Gas Company, .............. 3,640,000
5.50% 7-07-98 ............................... 2,637,581
5.53%, 7-16-98 .............................. 997,696
Questar Corporation ............................ 3,070,000
5.60%, 7-02-98 .............................. 2,549,603
5.62%, 8-04-98 .............................. 517,240
_________
6,702,120
PRINCIPAL MARKET
COMMERCIAL PAPER AMOUNT VALUE
- --------------------------------------------------------------------------------
NUCLEAR- 2.4%
Bayshore Fuel Company, ......................... $ 1,729,000
5.50%, 7-17-98 .............................. $ 1,050,426
5.55%, 8-27-98 .............................. 670,060
___________
1,720,486
PETROLEUM - 1.1%
Atlantic Richfield Company,
5.53%, 8-07-98 .............................. 800,000 795,453
PHOTOGRAPH/IMAGING - 5.5%
EastmanKodak Company ........................... 3,920,000
5.50%, 7-30-98 .............................. 2,887,151
5.51%, 8-03-98 .............................. 696,471
5.50%, 8-20-98 .............................. 317,556
___________
3,901,178
RECREATION - 2.8%
Carnival Corporation,
5.54%, 7-27-98 .............................. 2,000,000 1,991,998
RETAIL - GROCERY - 5.1%
Winn-Dixie Stores, Inc., ....................... 3,700,000
5.50%, 7-28-98 .............................. 1,400,194
5.51%, 7-28-98 .............................. 2,284,526
___________
3,684,720
TELECOMMUNICATIONS - 2.1%
Bell Atlantic Network Funding
Corporation, 5.50%, 7-07-98 ................. 1,500,000 1,498,625
TOYS & SPORTING GOODS - 4.0%
Toys 'R' Us, ................................... 2,850,000
5.51%, 7-06-98 .............................. 2,098,393
5.50%, 8-04-98 .............................. 746,104
___________
2,844,497
___________
Total commercial paper - 82.4% ................. 58,811,489
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
22
<PAGE> 24
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1998 (UNAUDITED)
SECURITY CASH FUND (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
U.S. GOVERNMENT & AGENCIES AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL FARM CREDIT BANKS - 2.8%
Federal Farm Credit Bank,
5.50%, 9-01-98 .............................. $ 2,000,000 $ 2,000,000
FEDERAL HOME LOAN BANKS - 8.4%
5.53%, 2-26-99 .............................. 2,000,000 2,000,000
5.625%, 3-12-99 ............................. 2,000,000 2,000,000
5.70%, 4-15-99 .............................. 2,000,000 2,000,000
___________
6,000,000
SMALL BUSINESS ASSOCIATION POOLS - 6.0%
#501927, 6.75%, 2017(2) ..................... 1,543,267 1,557,831
#502398, 6.125%, 2018(3) .................... 676,176 678,711
#503152, 6.125%, 2020(3) .................... 736,513 736,513
#503295, 6.00%, 2021(3) ..................... 627,512 627,905
#503303, 6.00%, 2021(3) ..................... 685,168 685,597
___________
4,286,557
___________
Total U.S. government & agencies -17.2% ........ 12,286,557
___________
Total investments - 99.6% ...................... 71,098,046
Cash and other assets,
less liabilities - 0.4% ..................... 306,283
___________
Total net assets - 100.0% ...................... $71,404,329
===========
</TABLE>
The identified cost of investments owned at June 30, 1998, was the same for
federal income tax and book purposes.
(1)Trust Preferred Securities - Securities issued by financial institutions to
augment their Tier 1 capital base. Issued on a subordinate basis relative to
senior notes or debentures. Institutions may defer cash payments for up to 10
pay periods.
(2)Variable rate security which may be reset the first of each month.
(3)Variable rate security which may be reset the first of each quarter.
(4)Variable rate security which may be reset daily.
See accompanying notes.
- --------------------------------------------------------------------------------
23
<PAGE> 25
BALANCE SHEETS
- --------------------------------------------------------------------------------
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Security Income Fund
--------------------------------------------------------
U.S. Limited High Security Security
Corporate Government Maturity Yield Municipal Bond Cash
Bond Series Series Bond Series Series Fund Fund
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (identified cost
$61,576,582, $14,731,853, $6,331,729,
$8,528,333, $24,195,259, and
$12,286,557, respectively) ............ $ 63,645,498 $ 15,145,323 $ 6,451,520 $8,686,962 $25,077,881 $12,286,557
Commercial paper, at amortized cost which
approximates market value ............. - - - - - 58,811,489
Cash .................................... 105,378 230,016 105,577 101,546 67,482 239,973
Receivables:
Fund shares sold ...................... 8,214 867 92 36 255 159,670
Securities sold ....................... 40,200 - - - - 28,543
Interest .............................. 937,804 202,254 107,553 185,910 306,792 160,354
Prepaid expenses ........................ 15,837 29,226 20,411 1,556 12,679 61,123
------------- ------------ ----------- ---------- ----------- -----------
Total assets ................ $ 64,752,931 $ 15,607,686 $ 6,685,153 $8,976,010 $25,465,089 $71,747,709
============= ============ =========== ========== =========== ===========
LIABILITIES AND NET ASSETS
Liabilities:
Payable for:
Securities purchased .................. $ - $ - $ - $ - $ 2,568,015 $ -
Fund shares redeemed .................. 63,786 529 - - - 6,801
Other Liabilities:
Management fees ....................... 28,320 - - - 10,209 33,101
Custodian fees ........................ 1,161 627 1,873 151 - 1,542
Transfer and administration fees ...... 16,742 7,331 980 2,084 3,018 12,903
Professional fees ..................... 4,881 11,020 2,807 - 1,813 5,017
12b-1 distribution plan fees .......... 19,805 5,622 2,169 4,479 6,277 -
Miscellaneous fees .................... 8,587 1,310 3,323 4,229 986 284,016
------------- ------------ ----------- ---------- ----------- -----------
Total liabilities .................. 143,282 26,439 11,152 10,943 2,590,318 343,380
Net Assets:
Paid in capital .......................... 75,251,642 16,114,999 6,562,519 8,660,013 23,067,224 71,404,329
Undistributed net investment income ...... 66,220 1,803 1,881 9,293 26,061 -
Accumulated undistributed net realized
gain (loss) on sale of investments .... (12,777,129) (949,025) (10,190) 137,132 (1,101,136) -
Net unrealized appreciation
in value of investments, futures,
and foreign currency transactions ..... 2,068,916 413,470 119,791 158,629 882,622 -
------------- ------------ ----------- ---------- ----------- -----------
Net assets ...... 64,609,649 15,581,247 6,674,001 8,965,067 22,874,771 71,404,329
------------- ------------ ----------- ---------- ----------- -----------
Total liabilities and net assets $ 64,752,931 $ 15,607,686 $ 6,685,153 $8,976,010 $25,465,089 $71,747,709
============= ============ =========== ========== =========== ===========
CLASS "A" SHARES
Capital shares outstanding .............. 7,886,001 2,424,673 543,053 325,600 2,096,089 71,404,329
Net assets .............................. $ 55,900,364 $ 11,779,245 $ 5,605,847 $5,125,007 $21,127,548 $71,404,329
Net asset value per share (net assets
divided by shares outstanding) ... $ 7.09 $ 4.86 $ 10.32 $ 15.74 $ 10.08 $ 1.00
Add: Selling commission (4.75% of the
offering price) .................. 0.35 0.24 0.51 0.78 0.50 -
------------- ------------ ----------- ---------- ----------- -----------
Offering price per share (net asset value
divided by 95.25%) ................... $ 7.44 $ 5.10 $ 10.83 $ 16.52 $ 10.58 $ 1.00
============= ============ =========== ========== =========== ===========
CLASS "B" SHARES
Capital shares outstanding .......... 1,221,482 783,414 103,614 244,464 173,287 --
Net assets .......................... $ 8,709,285 $ 3,802,002 $ 1,068,154 $3,840,060 $ 1,747,223 --
Net asset value per share (net assets
divided by shares outstanding) ... $ 7.13 $ 4.85 $ 10.31 $ 15.71 $ 10.08 --
============= ============ =========== ========== =========== ===========
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
24
<PAGE> 26
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Security Income Fund
-----------------------------------------------------------
U.S. Limited High Security Security
Corporate Government Maturity Yield Municipal Bond Cash
Bond Series Series Bond Series Series Fund Fund
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Interest ............................ $ 2,262,987 $ 336,294 $ 241,027 $ 401,711 $ 596,761 $ 1,842,661
Expenses:
Management fees ..................... 157,911 24,606 16,563 27,447 58,770 163,513
Custodian fees ...................... 1,526 1,008 3,375 4,897 545 3,191
Transfer/maintenance fees ........... 64,180 17,260 3,064 10,518 7,267 68,031
Administration fees ................. 28,424 4,429 2,982 4,117 10,579 14,716
Directors' fees ..................... 5,070 456 762 1,124 4,121 5,436
Professional fees ................... 6,006 8,647 2,431 3,299 1,646 2,329
Reports to shareholders ............. 3,406 758 2,209 26 1,805 1,500
Registration fees ................... 10,800 4,710 11,673 3,342 12,101 30,949
Other expenses ...................... 6,806 -- -- -- 1,423 --
12b-1 distribution plan fees ........ 106,706 18,290 12,249 26,244 18,093 --
___________ ___________ ___________ ___________ ___________ ___________
390,835 80,164 55,308 81,014 116,350 289,665
Less: Earnings credits applied ....... -- -- (1,436) -- (545) --
Reimbursement of expenses ...... (16,855) (24,606) (16,563) (27,447) (267) --
___________ ___________ ___________ ___________ ___________ ___________
Total expenses ................. 373,980 55,558 37,309 53,567 115,538 289,665
___________ ___________ ___________ ___________ ___________ ___________
Net investment income ......... 1,889,007 280,736 203,718 348,144 481,223 1,552,996
Net realized and unrealized gain (loss):
Net realized gain during the period on
investments ...................... 415,189 11,545 52,401 136,547 145,821 --
Net change in unrealized appreciation
(depreciation) during the period on
investments ...................... (102,593) 102,329 (33,302) (115,349) (161,717) --
___________ ___________ ___________ ___________ ___________ ___________
Net gain (loss) ............... 312,596 113,874 19,099 21,198 (15,896) --
___________ ___________ ___________ ___________ ___________ ___________
Net increase in net assets
resulting from operations ... $ 2,201,603 $ 394,610 $ 222,817 $ 369,342 $ 465,327 $ 1,552,996
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
25
<PAGE> 27
STATEMENT OF CHANGES IN NET ASSETS
................................................................................
FOR THE SIX MONTHS ENDED
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Security Income Fund
-------------------------------------------------
U.S. Limited High Security
Corporate Government Maturity Yield Municipal Bond
Bond Series Series Bond Series Series Fund
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM
OPERATIONS:
Net investment income .................. $ 1,889,007 $ 280,736 $ 203,718 $ 348,144 $ 481,223
Net realized gain .................... 415,189 11,545 52,401 136,547 145,821
Unrealized appreciation (depreciation)
during the period ................. (102,593) 102,329 (33,302) (115,349) (161,717)
------------- ------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations ...... 2,201,603 394,610 222,817 369,342 465,327
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A ........................... (1,651,540) (245,005) (178,912) (201,873) (433,083)
Class B ........................... (193,451) (37,692) (27,022) (136,978) (25,031)
Net realized gain
Class A ........................... -- -- -- -- --
Class B ........................... -- -- -- 585 --
------------- ------------- ------------- ------------- -------------
Total distributions to
shareholders ............... (1,844,991) (282,697) (205,934) (338,266) (458,114)
CAPITAL SHARE TRANSACTIONS (A):
Proceeds from sale of shares
Class A ........................... 5,019,533 1,855,616 193,181 409,025 653,306
Class B ........................... 3,185,796 145,969 21,050 164,716 121,323
Dividends reinvested
Class A ........................... 1,210,341 4,251,225 161,469 201,217 252,133
Class B .............. 165,015 3,122,292 27,022 136,316 12,134
Shares redeemed
Class A ........................... (7,130,647) (2,066,588) (252,029) (678,720) (1,736,780)
Class B ........................... (1,176,931) (581,767) (37,749) (910,028) (731,870)
------------- ------------- ------------- ------------- -------------
Net increase (decrease)
from capital share
transactions ................... 1,273,107 6,726,747 112,944 (677,474) (1,429,754)
------------- ------------- ------------- ------------- -------------
Total increase (decrease)
in net assets ............... 1,629,719 6,838,660 129,827 (646,398) (1,422,541)
NET ASSETS:
Beginning of period .................. 62,979,930 8,742,587 6,544,174 9,611,465 24,297,312
------------- ------------- ------------- ------------- -------------
End of period ........................ $ 64,609,649 $ 15,581,247 $ 6,674,001 $ 8,965,067 $ 22,874,771
============= ============= ============= ============= =============
Undistributed net investment income
at end of period ..................... $ 66,220 $ 1,803 $ 1,881 $ 9,293 $ 26,061
============= ============= ============= ============= =============
(a) Shares issued and redeemed
Shares sold
Class A ....................... 709,590 1,215,968 18,675 25,717 64,730
Class B ....................... 447,800 669,189 2,043 10,401 12,029
Dividends reinvested
Class A ....................... 172,218 45,056 15,689 12,703 25,074
Class B ....................... 23,304 7,356 2,632 8,624 1,206
Shares redeemed
Class A ....................... (1,009,108) (426,543) (24,374) (42,502) (172,394)
Class B ....................... (165,323) (120,225) (3,669) (57,220) (72,603)
------------- ------------- ------------- ------------- -------------
Net increase (decrease) ........ 178,481 1,390,801 10,996 (42,277) (141,958)
============= ============= ============= ============= =============
<CAPTION>
Security
Cash
Fund
-------------
<S> <C>
INCREASE IN NET ASSETS FROM
OPERATIONS:
Net investment income .................. $ 1,552,996
Net realized gain .................... --
Unrealized appreciation (depreciation)
during the period ................. --
-------------
Net increase in net assets
resulting from operations ...... 1,552,996
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A ........................... (1,552,996)
Class B ........................... --
Net realized gain
Class A ........................... --
Class B ........................... --
-------------
Total distributions to
shareholders ............... (1,552,996)
CAPITAL SHARE TRANSACTIONS (A):
Proceeds from sale of shares
Class A ........................... 105,000,245
Class B ........................... --
Dividends reinvested
Class A ........................... 1,427,964
Class B ........................... --
Shares redeemed
Class A ........................... (92,464,665)
Class B ........................... --
-------------
Net increase (decrease)
from capital share
transactions ................... 13,963,544
-------------
Total increase (decrease)
in net assets ............... 13,963,544
NET ASSETS:
Beginning of period .................. 57,440,785
-------------
End of period ........................ $ 71,404,329
=============
Undistributed net investment income
at end of period ..................... $ --
=============
(a) Shares issued and redeemed
Shares sold
Class A ....................... 105,000,245
Class B ....................... --
Dividends reinvested
Class A ....................... 1,427,964
Class B ....................... --
Shares redeemed
Class A ....................... (92,464,665)
Class B ....................... --
-------------
Net increase (decrease) ........ 13,963,544
=============
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
26
<PAGE> 28
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
...................................................................................................................................
FOR THE YEAR ENDED DECEMBER 31, 1997
Security Income Fund
---------------------------------------------------
U.S. Limited High Security Security
Corporate Government Maturity Yield Municipal Bond Cash
Bond Series Series Bond Series Series Fund Fund
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 4,348,326 $ 564,698 $ 428,582 $ 562,155 $ 974,901 $ 2,334,419
Net realized gain (loss) (819,146) 17,807 14,159 159,295 230,930 -
Unrealized appreciation (depreciation)
during the period 2,374,236 149,552 89,543 126,911 592,486 -
----------- ---------- ---------- ---------- ----------- -----------
Net increase in net assets
resulting from operations 5,903,416 732,057 532,284 848,361 1,798,317 2,334,419
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (3,949,944) (514,896) (368,619) (321,919) (930,144) (2,334,419)
Class B (403,170) (46,196) (56,487) (241,725) (47,364)
Net realized gain
Class A - - - (67,514) - -
Class B - - - (57,795) - -
----------- ---------- ---------- ---------- ----------- -----------
Total distributions to
shareholders (4,353,114) (561,092) (425,106) (688,953) (977,508) (2,334,419)
CAPITAL SHARE TRANSACTIONS (a):
Proceeds from sale of shares
Class A 7,162,943 1,566,140 1,371,189 2,272,583 2,482,623 234,698,276
Class B 4,821,878 684,955 399,599 1,441,420 1,198,639 -
Dividends reinvested
Class A 2,918,082 427,733 329,483 389,121 493,192 2,203,684
Class B 363,965 40,597 56,486 298,860 31,059 -
Shares redeemed
Class A (28,343,679) (2,531,194) (1,243,300) (358,981) (5,087,737) (224,791,899)
Class B (6,157,206) (314,008) (175,370) (90,052) (455,776) -
----------- ---------- ---------- ---------- ----------- -----------
Net increase (decrease)
from capital share
transactions (19,234,017) (125,777) 738,087 3,952,951 (1,338,000) 12,110,061
----------- ---------- ---------- ---------- ----------- -----------
Total increase (decrease)
in net assets (17,683,715) 45,188 845,265 4,112,359 (517,191) 12,110,061
NET ASSETS:
Beginning of period 80,663,645 8,697,399 5,698,909 5,499,106 24,814,503 45,330,724
----------- ---------- ---------- ---------- ----------- -----------
End of period $62,979,930 $8,742,587 $6,544,174 $9,611,465 $24,297,312 $57,440,785
=========== ========== ========== ========== =========== ===========
Undistributed net investment income
at end of period $ 22,204 $ 3,764 $ 4,097 $ - $ 2,952 $ -
=========== ========== ========== ========== =========== ===========
(a) Shares issued and redeemed
Shares sold
Class A 1,036,267 329,947 136,018 146,171 251,471 234,698,276
Class B 691,990 144,444 39,239 91,689 120,884 -
Dividends reinvested
Class A 425,158 90,953 32,458 24,910 49,419 2,203,684
Class B 52,774 8,630 5,576 19,160 3,160 -
Shares redeemed
Class A (4,129,146) (535,552) (122,325) (22,867) (519,951) (224,791,899)
Class B (886,785) (66,308) (17,298) (5,669) (46,659) -
----------- ---------- ---------- ---------- ----------- -----------
Net increase (decrease) (2,809,742) (27,886) 73,668 253,394 (141,676) 12,110,061
=========== ========== ========== ========== =========== ===========
</TABLE>
See accompanying notes.
------------------------------------------------------------------------------
27
<PAGE> 29
FINANCIAL HIGHLIGHTS
...............................................................................
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CORPORATE BOND SERIES (CLASS A)
<TABLE>
<CAPTION>
Fiscal Period Ended December 31
---------------------------------------------------------------------------------
1998 (d)(h) 1997(d) 1996(d)(f) 1995(d)(f) 1994 1993
----------- ------- ---------- ---------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD..... $7.05 $6.87 $7.39 $6.68 $7.81 $7.72
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income................... 0.21 0.45 0.47 0.47 0.49 0.52
Net Gain (Loss) on Securities
(realized & unrealized)............... 0.04 0.19 (0.52) 0.71 (1.13) 0.52
------ ------ ------ ------ ------ ------
Total from Investment Operations........ 0.25 0.64 (0.05) 1.18 (0.64) 1.04
LESS DISTRIBUTIONS
Dividends (from Net Investment Income).. (0.21) (0.46) (0.47) (0.47) (0.49) (0.53)
Distributions (from Capital Gains)...... - - - - - (0.42)
------ ------ ------ ------ ------ ------
Total Distributions................... (0.21) (0.46) (0.47) (0.47) (0.49) (0.95)
------ ------ ------ ------ ------ ------
NET ASSET VALUE END OF PERIOD........... $7.09 $7.05 $6.87 $7.39 $6.68 $7.81
------ ------ ------ ------ ------ ------
TOTAL RETURN (A)........................ 3.6% 9.7% (0.5%) 18.2% (8.3%) 13.4%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands).... $55,900 $56,487 $73,360 $93,701 $90,593 $118,433
Ratio of Expenses to Average Net Assets. 1.10% 1.07% 1.01% 1.02% 1.01% 1.02%
Ratio of Net Investment Income (Loss)
to Average Net Assets................. 6.07% 6.50% 6.54% 6.62% 6.91% 6.46%
Portfolio Turnover Rate................. 75% 120% 292% 200% 204% 157%
</TABLE>
CORPORATE BOND SERIES (CLASS B)
<TABLE>
<CAPTION>
Fiscal Period Ended December 31
---------------------------------------------------------------------------------
1998 (d)(h) 1997(c)(d) 1996(c)(d)(f) 1995(c)(d)(f) 1994(c) 1993(b)
----------- ---------- ------------- ------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD..... $7.09 $6.90 $7.43 $ 6.71 $ 7.84 $8.59
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income................... 0.18 0.40 0.40 0.40 0.43 0.11
Net Gain (Loss) on Securities
(realized & unrealized)............... 0.04 0.19 (0.52) 0.73 (1.13) (0.32)
------ ------ ------ ------ ------ ------
Total from Investment Operations........ 0.22 0.59 (0.12) 1.13 (0.70) (0.21)
LESS DISTRIBUTIONS
Dividends (from Net Investment Income).. (0.18) (0.40) (0.41) (0.41) (0.43) (0.11)
Distributions (from Capital Gains)...... - - - - - (0.43)
------ ------ ------ ------ ------ ------
Total Distributions................... (0.18) (0.40) (0.41) (0.41) (0.43) (0.54)
------ ------ ------ ------ ------ ------
NET ASSET VALUE END OF PERIOD........... $7.13 $7.09 $6.90 $7.43 $6.71 $7.84
====== ====== ====== ====== ====== ======
TOTAL RETURN(A)......................... 3.2% 8.7% (1.4%) 17.3% (9.0%) (2.5%)
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands).... $8,709 $6,493 $7,303 $5,743 $3,878 $1,022
Ratio of Expenses to Average Net Assets. 1.85% 1.85% 1.85% 1.85% 1.85% 1.88%
Ratio of Net Investment Income (Loss)
to Average Net Assets................. 5.32% 5.72% 5.70% 5.80% 6.08% 5.16%
Portfolio Turnover Rate................. 75% 120% 292% 200% 204% 164%
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
28
<PAGE> 30
FINANCIAL HIGHLIGHTS
...............................................................................
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
U.S. GOVERNMENT SERIES (CLASS A)
<TABLE>
<CAPTION>
Fiscal Period Ended December 31
--------------------------------------------------------------------------------------------
1998 (c)(d)(f)(h) 1997(c)(d)(f) 1996(c)(d)(f) 1995(c)(d)(f) 1994(c) 1993(c)
----------------- ------------- ------------- ------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD.... $4.81 $4.71 $4.97 $4.35 $4.97 $5.04
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income.................. 0.14 0.32 0.31 0.30 0.30 0.31
Net Gain (Loss) on Securities
(realized & unrealized).............. 0.05 0.10 (0.26) 0.62 (0.62) 0.27
------ ------ ------- ------ ------ ------
Total from Investment Operations....... 0.19 0.42 0.05 0.92 (0.32) 0.58
LESS DISTRIBUTIONS
Dividends (from Net Investment Income). (0.14) (0.32) (0.31) (0.30) (0.30) (0.31)
Distributions (from Capital Gains)..... - - - - - (0.34)
------ ------ ------- ------ ------ ------
Total Distributions.................. (0.14) (0.32) (0.31) (0.30) (0.30) (0.65)
------ ------ ------- ------ ------ ------
NET ASSET VALUE END OF PERIOD.......... $4.86 $4.81 $4.71 $4.97 $4.35 $4.97
====== ====== ======= ====== ====== ======
TOTAL RETURN (A)....................... 4.0% 9.2% 1.3% 21.9% (6.5%) 10.9%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands)... $11,779 $7,652 $8,036 $10,080 $8,309 $10,098
Ratio of Expenses to Average Net Assets 0.85% 0.60% 0.65% 1.11% 1.10% 1.10%
Ratio of Net Investment Income (Loss)
to Average Net Assets................ 5.01% 6.10% 6.44% 6.41% 6.47% 5.90%
Portfolio Turnover Rate................ 27% 39% 75% 81% 220% 153%
</TABLE>
U.S. GOVERNMENT SERIES (CLASS B)
<TABLE>
<CAPTION>
Fiscal Period Ended December 31
--------------------------------------------------------------------------------------------
1998 (c)(d)(h) 1997(c)(d) 1996(c)(d)(f) 1995(c)(d)(f) 1994(c) 1993(b)(c)
----------------- ------------- ------------- ------------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD.... $4.80 $4.71 $4.97 $4.35 $4.97 $5.51
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income.................. 0.14 0.26 0.25 0.26 0.26 0.04
Net Gain (Loss) on Securities
(realized & unrealized).............. 0.02 0.10 (0.25) 0.63 (0.62) (0.19)
------ ------ ------- ------ ------ ------
Total from Investment Operations....... 0.16 0.36 (0.00) 0.89 (0.36) (0.15)
LESS DISTRIBUTIONS
Dividends (from Net Investment Income). (0.11) (0.27) (0.26) (0.27) (0.26) (0.04)
Distributions (from Capital Gains)..... - - - - - (0.35)
------ ------ ------- ------ ------ ------
Total Distributions.................. (0.11) (0.27) (0.26) (0.27) (0.26) (0.39)
------ ------ ------- ------ ------ ------
NET ASSET VALUE END OF PERIOD.......... $4.85 $4.80 $4.71 $4.97 $4.35 $4.97
====== ====== ======= ====== ====== ======
TOTAL RETURN (A)....................... 3.4% 7.9% (0.02%) 20.9% (7.4%) (1.4%)
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands)... $3,802 $1,091 $661 $582 $321 $140
Ratio of Expenses to Average Net Assets 1.65% 1.68% 1.86% 1.87% 1.85% 1.61%
Ratio of Net Investment Income (Loss)
to Average Net Assets................ 4.40% 5.02% 5.23% 5.69% 5.76% 5.54%
Portfolio Turnover Rate................ 27% 39% 75% 81% 220% 114%
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
29
<PAGE> 31
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
................................................................................................................
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
LIMITED MATURITY BOND SERIES (CLASS A)
Fiscal Period Ended December 31
--------------------------------------------------------------------
1998 (c)(d)(f)(h) 1997 (c)(d)(f) 1996 (c)(d)(f) 1995 (c)(d)(e)(f)
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 10.30 $ 10.14 $ 10.66 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income......................... 0.31 0.72 0.72 0.62
Net Gain (Loss) on Securities
(realized & unrealized)..................... 0.03 0.16 (0.51) 0.65
------- ------- ------- -------
Total from Investment Operations.............. 0.34 0.88 0.21 1.27
LESS DISTRIBUTIONS
Dividends (from Net Investment Income)........ (0.32) (0.72) (0.72) (0.61)
Distributions (from Capital Gains) - - - -
Return of Capital............................. - - (0.01) -
------- ------- ------- -------
Total Distributions......................... (0.32) (0.72) (0.73) (0.61)
------- ------- ------- -------
NET ASSET VALUE END OF PERIOD................. $ 10.32 $ 10.30 $ 10.14 $ 10.66
======= ======= ======= =======
TOTAL RETURN (a).............................. 3.5% 9.0% 2.1% 13.0%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands).......... $ 5,606 $ 5,490 $ 4,938 $ 3,322
Ratio of Expenses to Average Net Assets....... 1.03% 0.55% 0.90% 0.84%
Ratio of Net Investment Income (Loss)
to Average Net Assets....................... 6.29% 7.10% 6.97% 5.97%
Portfolio Turnover Rate....................... 91% 76% 105% 4%
LIMITED MATURITY BOND SERIES (CLASS B)
Fiscal Period Ended December 31
--------------------------------------------------------------------
1998 (c)(d)(f)(h) 1997 (c)(d)(f) 1996 (c)(d)(f) 1995 (c)(d)(e)(f)
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value Beginning of Period........... $ 10.27 $ 10.14 $ 10.67 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income....................... 0.27 0.61 0.63 0.53
Net Gain (Loss) on Securities
(realized & unrealized).................. 0.03 0.14 (0.52) 0.66
------- ------- ------- -------
Total from Investment Operations............ 0.30 0.75 0.11 1.19
LESS DISTRIBUTIONS
Dividends (from Net Investment Income)........ (0.26) (0.62) (0.63) (0.52)
Distributions (from Capital Gains) - - - -
Return of Capital............................. - - (0.01) -
------- ------- ------- -------
Total Distributions........................... (0.26) (0.62) (0.64) (0.52)
------- ------- ------- -------
NET ASSET VALUE END OF PERIOD................. $ 10.31 $ 10.27 $ 10.14 $ 10.67
======= ======= ======= =======
TOTAL RETURN (a).............................. 3.0% 7.7% 1.1% 12.2%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands).......... $ 1,068 $ 1,054 $ 761 $ 752
Ratio of Expenses to Average Net Assets....... 1.89% 1.50% 1.88% 1.71%
Ratio of Net Investment Income (Loss)
to Average Net Assets........................ 5.43% 6.15% 5.99% 5.12%
Portfolio Turnover Rate....................... 91% 76% 105% 4%
</TABLE>
See accompanying notes.
- ------------------------------------------------------------------------------
30
<PAGE> 32
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
................................................................................................................
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
HIGH YIELD SERIES (CLASS A)
Fiscal Period Ended December 31
-------------------------------------------------
1998 (c)(d)(h) 1997(c)(d) 1996(c)(d)(g)
-------------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD........... $15.71 $15.32 $15.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income......................... 1.27 1.25 0.45
Net Gain (Loss) on Securities
(realized & unrealized)..................... (0.62) 0.60 0.32
------- ------- ------
Total from Investment Operations......... 0.65 1.85 0.77
LESS DISTRIBUTIONS
DIvidends (from Net Investment Income)........ (0.62) (1.25) (0.45)
Distributions (from Capital Gains)............ - (0.21) -
------- ------- ------
Total Distributions......................... (0.62) (1.46) (0.45)
------- ------- ------
NET ASSET VALUE END OF PERIOD................. $15.74 $15.71 $15.32
======= ======= ======
TOTAL RETURN (a).............................. 4.2% 12.6% 5.2%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands).......... $5,125 $5,179 $2,780
Ratio of Expenses to Average Net Assets....... 0.78% 0.87% 1.54%
Ratio of Net Investment Income (Loss)
to Average Net Assets........................ 8.00% 8.14% 7.47%
Portfolio Turnover Rate....................... 144% 87% 168%
HIGH YIELD SERIES (CLASS B)
Fiscal Period Ended December 31
-------------------------------------------------
1998 (c)(d)(h) 1997(c)(d) 1996(c)(d)(g)
-------------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD........... $15.68 $15.32 $15.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income......................... 1.12 1.10 0.41
Net Gain (Loss) on Securities
(realized & unrealized)..................... (0.54) 0.59 0.32
------- ------- ------
Total from Investment Operations.............. 0.58 1.69 0.73
LESS DISTRIBUTIONS
Dividends (from Net Investment Income)........ (0.55) (1.12) (0.41)
Distributions (from Capital Gains)............ - (0.21) -
------- ------- ------
Total Distributions......................... (0.55) (1.33) (0.41)
------- ------- ------
NET ASSET VALUE END OF PERIOD................. $15.71 $15.68 $15.32
======= ======= ======
TOTAL RETURN (A).............................. 3.8% 11.5% 4.9%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands).......... $3,840 $4,432 $2,719
Ratio of Expenses to Average Net Assets....... 1.68% 1.80% 2.26%
Ratio of Net Investment Income (Loss)
to Average Net Assets........................ 7.10% 7.21% 6.74%
Portfolio Turnover Rate....................... 144% 87% 168%
</TABLE>
See accompanying notes.
- -----------------------------------------------------------------------------
31
<PAGE> 33
FINANCIAL HIGHLIGHTS
................................................................................
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SECURITY MUNICIPAL BOND FUND (CLASS A)
FISCAL PERIOD ENDED DECEMBER 31
-------------------------------------------------------------------------------------
1998 (c)(d)(f)(h) 1997 (c)(d) 1996 (c)(d)(f) 1995 (c)(d)(f) 1994 1993
----------------- ----------- -------------- -------------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD........... $10.08 $9.72 $9.94 $9.05 $10.37 $10.06
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income......................... 0.21 0.42 0.45 0.48 0.47 0.51
Net Gain (Loss) on Securities
(realized & unrealized)..................... (0.01) 0.36 (0.21) 0.89 (1.32) 0.70
------ ------ ----- ----- ----- ------
Total from Investment Operations.............. 0.20 0.78 0.24 1.37 (0.85) 1.21
LESS DISTRIBUTIONS
Dividends (from Net Investment Income)........ (0.20) (0.42) (0.46) (0.48) (0.47) (0.51)
Distributions (from Capital Gains)............ - - - - - (0.39)
------ ------ ----- ----- ----- ------
Total Distributions......................... (0.20) (0.42) (0.46) (0.48) (0.47) (0.90)
------ ------ ----- ----- ----- ------
NET ASSET VALUE END OF PERIOD................. $10.08 $10.08 $9.72 $9.94 $9.05 $10.37
====== ====== ===== ===== ===== ======
TOTAL RETURN (a).............................. 2.0% 8.3% 2.5% 15.5% (8.3%) 11.6%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands).......... $21,128 $21,953 $23,304 $25,026 $24,092 $32,115
Ratio of Expenses to Average Net Assets....... 0.90% 0.82% 0.78% 0.86% 0.82% 0.82%
Ratio of Net Investment Income (Loss)
to Average Net Assets....................... 4.18% 4.29% 4.67% 5.02% 4.74% 4.92%
Portfolio Turnover Rate....................... 84% 48% 54% 103% 88% 118%
</TABLE>
<TABLE>
<CAPTION>
SECURITY MUNICIPAL BOND FUND (CLASS B)
FISCAL PERIOD ENDED DECEMBER 31
-------------------------------------------------------------------------------------
1998 (c)(d)(f)(h) 1997 (c)(d) 1996 (c)(d)(f) 1995 (c)(d)(f) 1994 (c) 1993 (b)
----------------- ----------- -------------- -------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD........... $10.08 $9.73 $9.95 $9.05 $10.37 $10.88
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income......................... 0.14 0.29 0.33 0.37 0.35 0.10
Net Gain (Loss) on Securities
(realized & unrealized)..................... - 0.37 (0.21) 0.90 (1.32) (0.13)
------ ------ ----- ----- ----- ------
Total from Investment Operations.............. 0.14 0.66 0.12 1.27 (0.97) (0.03)
LESS DISTRIBUTIONS
Dividends (from Net Investment Income)........ (0.14) (0.31) (0.34) (0.37) (0.35) (0.09)
Distributions (from Capital Gains)............ - - - - - (0.39)
------ ------ ----- ----- ----- ------
Total Distributions......................... (0.14) (0.31) (0.34) (0.37) (0.35) (0.48)
------ ------ ----- ----- ----- ------
NET ASSET VALUE END OF PERIOD................. $10.08 $10.08 $9.73 $9.95 $9.05 $10.37
====== ====== ===== ===== ===== ======
TOTAL RETURN (a).............................. 1.4% 6.9% 1.2% 14.3% (9.5%) (0.2%)
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands).......... $1,747 $2,344 $1,510 $1,190 $760 $106
Ratio of Expenses to Average Net Assets....... 2.00% 2.00% 2.01% 2.00% 2.00% 2.89%
Ratio of Net Investment Income (Loss)
to Average Net Assets....................... 3.08% 3.11% 3.44% 3.90% 3.50% 2.71%
Portfolio Turnover Rate....................... 84% 48% 54% 103% 88% 90%
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
32
<PAGE> 34
FINANCIAL HIGHLIGHTS
................................................................................
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SECURITY CASH FUND
FISCAL PERIOD ENDED DECEMBER 31
----------------------------------------------------------------------------------
1998 (d)(h) 1997 (d) 1996 (c)(d)(f) 1995 (c)(d)(f) 1994 1993 (c)
----------- -------- -------------- -------------- ---- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income............................. 0.02 0.05 0.05 0.05 0.03 0.02
Net Gain (Loss) on Securities
(realized & unrealized) - - - - - -
------- ------- ------- ------- ------- -------
Total from Investment Operations.................. 0.02 0.05 0.05 0.05 0.03 0.02
LESS DISTRIBUTIONS
Dividends (from Net Investment Income)............ (0.02) (0.05) (0.05) (0.05) (0.03) (0.02)
Distributions (from Capital Gains) - - - - - -
------- ------- ------- ------- ------- -------
Total Distributions............................. (0.02) (0.05) (0.05) (0.05) (0.03) (0.02)
------- ------- ------- ------- ------- -------
NET ASSET VALUE END OF PERIOD..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
TOTAL RETURN (a).................................. 2.4% 4.9% 4.6% 5.0% 3.4% 2.4%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands).............. $71,404 $57,441 $45,331 $38,158 $58,102 $71,870
Ratio of Expenses to Average Net Assets........... 0.89% 0.90% 1.01% 1.00% 0.96% 1.00%
Ratio of Net Investment Income (Loss)
to Average Net Assets........................... 4.70% 4.80% 4.47% 5.00% 3.24% 2.28%
</TABLE>
(a) Total return information does not take into account any charges paid at
time of purchase or contingent deferred sales charges paid at time of
redemption.
(b) Class "B" shares were initially issued on October 19, 1993. Percentage
amounts for the period, except total return, have been annualized.
(c) Fund expenses were reduced by the Investment Manager and expense ratios
absent such reimbursement would have been as follows:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Corporate Bond Series Class B -- 2.00% 2.19% 2.05% 2.10% 2.29%
U.S. Government Series Class A 1.20% 1.20% 1.22% 1.17% 1.06% 1.28%
Class B 1.75% 2.91% 3.70% 3.26% 2.14% 2.51%
Limited Maturity Class A -- -- 1.04% 1.40% 1.04% 1.53%
Bond Series Class B -- -- 2.12% 2.60% 1.99% 2.82%
High Yield Series Class A -- -- -- 2.11% 1.44% 1.38%
Class B -- -- -- 2.83% 2.37% 2.28%
Municipal Bond Fund Class A -- -- 0.86% 0.78% 0.83% 0.90%
Class B -- 2.32% 2.45% 2.19% 2.00% 2.04%
Cash Fund 1.03% -- 1.04% 1.01% -- --
</TABLE>
(d) Net investment income was computed using the average month-end shares
outstanding throughout the period.
(e) Security Limited Maturity Bond Series was initially capitalized on January
17, 1995, with a net asset value of $10 per share. Percentage amounts for
period have been annualized, except for total return.
(f) Expense ratios, including reimbursements, were calculated without the
reduction for custodian fees earnings credits beginning February 1, 1995.
Expense ratios with such reductions would have been as follows:
<TABLE>
<CAPTION>
1995 1996 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Corporate Bond Series Class A 1.02% 1.01% -- --
Class B 1.85% 1.85% -- --
U.S. Government Series Class A 1.10% 0.64% -- --
Class B 1.85% 1.85% -- --
Limited Maturity Class A 0.81% 0.87% 0.51% 0.99%
Bond Series Class B 1.65% 1.85% 1.46% 1.85%
Municipal Bond Fund Class A 0.85% 0.77% 0.83% 0.90%
Class B 2.00% 2.00% 2.00% 2.00%
Cash Fund 1.00% 1.00% 1.00% 0.89%
</TABLE>
(g) Security High Yield Series was initially capitalized on August 15, 1996,
with a net asset value of $15 per share. Percentage amounts for the period
have been annualized, except for total return.
(h) Unaudited figures for the six months ended June 30, 1998. Percentage
amounts for the period, except total return have been annualized.
See accompanying notes.
- --------------------------------------------------------------------------------
33
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS
...............................................................................
June 30, 1998
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Security Income Fund, Security Municipal Bond Fund (formerly Security
Tax-Exempt Fund) and Security Cash Fund (the Funds) are registered under the
Investment Company Act of 1940, as amended, as diversified open-end
management investment companies. The shares of Security Income Fund are
currently issued in multiple series, with each series, in effect, representing
a separate Fund. The Income Fund is required to account for each series
separately and to allocate general expenses to each series based on the net
asset value of each series. Class A shares are sold with a sales charge at the
time of purchase. Class A shares are not subject to a sales charge when they
are redeemed. The Funds began offering an additional class of shares ("B"
shares) on October 19, 1993. The shares are offered without a front-end sales
charge but incur additional class-specific expenses. Redemptions of the shares
within five years of acquisition incur a contingent deferred sales charge.
The following is a summary of the significant accounting policies
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
A. SECURITY VALUATION - Valuations of Income Funds' and Municipal Bond
Fund's securities are supplied by pricing services approved by the
Board of Directors. Securities listed or traded on a national securities
exchange are valued on the basis of the last sales price. If there are no
sales on a particular day, then the securities are valued at the last bid
price. Securities for which market quotations are not readily available are
valued by a pricing service considering securities with similar yields,
quality, type of issue, coupon, duration and rating. If there is no bid price
or if the bid price is deemed to be unsatisfactory by the Board of Directors or
by the Funds' investment manager, then the securities are valued in good
faith by such method as the Board of Directors determines will reflect the fair
value. The Funds' officers, under the general supervision of the Board of
Directors, regularly review procedures used by, and valuations provided by, the
pricing service.
Cash Fund, by approval of the Board of Directors, utilizes the amortized
cost method for valuing portfolio securities, whereby all investments are
valued by reference to their acquisition cost as adjusted for
amortization of premium or accretion of discount.
B. OPTIONS - The High Yield Series may purchase put and call options and
write such options on a covered basis on securities that are traded on
recognized securities exchanges and over-the-counter markets. Call and put
options on securities give the holder the right to purchase or sell,
respectively (and the writer the obligation to sell or purchase), a security
at a specified price, until a certain date. The primary risks associated
with the use of options are an imperfect correlation between the change in
market value of the securities held by the Series and the price of the option,
the possibility of an illiquid market, and the inability of the counter-party
to meet the terms of the contract.
The premium received for a written option is recorded as an asset, with an
equal liability which is marked to market based on the option's quoted daily
settlement price. Fluctuation in the value of such instruments are recorded
as unrealized appreciation (depreciation) until terminated, at which time
realized gains and losses are recognized.
C.SECURITY TRANSACTIONS AND INVESTMENT INCOME - Security transactions
are accounted for on the date the securities are purchased or sold. Realized
gains and losses are reported on an identified cost basis. Interest income is
recognized on the accrual basis. Premium and discounts (except original
issue discounts) on debt securities are not amortized, except Security
Tax-Exempt Fund which amortizes premiums.
D.DISTRIBUTIONS TO SHAREHOLDERS - Distributions to shareholders are
recorded on the ex-dividend date. The character of distributions made during
the year from net investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes. These
differences are primarily due to the recharacterization of foreign currency
gains and losses.
E.TAXES - The Funds complied with the requirements of the Internal
Revenue Code applicable to regulated investment companies and distributed all
of their taxable net income and net realized gains sufficient to relieve them
from all, or substantially all, federal income, excise and state income taxes.
Therefore, no provision for federal or state income tax is required.
F.EARNINGS CREDITS - Under the fee schedule with the custodian, the
Funds earn credits based on overnight custody cash balances. These credits
are utilized to reduce related custodial expenses. The custodian fees
disclosed in the statement of operations do not reflect the reduction in
expense from the related earnings credits.
2. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees are payable to Security Management Company, LLC (SMC)
under investment advisory contracts at an annual rate of .50 of 1% of the
average net assets of each fund, except for the High Yield Series which fees
are .60 of 1% of the average net assets of the Series. The Investment
Manager pays Salomon Brothers Asset Management, Inc., an annual fee equal to
.22% of the average daily net assets of Security Municipal Bond Fund for
management services provided to the Fund. The investment advisory contract
for Income Fund provides that the total annual expenses of each Series of the
Fund (including management fees and custodian fees net of earnings credits,
but excluding interest, taxes, brokerage commissions, extraordinary expenses
and distribution fees paid under the Class B distribution plan) will not exceed
the level of expenses which Income Fund is permitted to bear under the most
restrictive expense limitation imposed by any state in which shares of the
Fund are then qualified for sale. For the six month period ended June 30, 1998,
SMC agreed to limit the total expenses of Corporate Bond Series, U.S.
Government Series and Limited Maturity Bond Series to an annual rate of 1.1%
of the average daily net asset value of Class A shares and 1.85% of Class B
shares of each respective Series. SMC also agreed to limit the total expenses
of the High Yield Series to 2.0% for Class A Shares and 2.75% for Class B
shares. In addition, SMC agreed to waive all of the management fees for the
U.S.
- --------------------------------------------------------------------------------
34
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
................................................................................
Government Series, Limited Maturity Bond Series and the High Yield Series
until December 31, 1998. The investment advisory contract for Municipal Bond
and Cash Funds provides that the total annual expenses of the Funds net of
custodian fee earnings credits will not exceed an amount equal to an annual
rate of 1.0% of the average net assets of Class A shares and 2.0% of Class B
shares of the Municipal Bond Fund as calculated on a daily basis.
The Funds have entered into contracts with SMC for transfer agent
services and certain other administrative services which SMC provides to the
Funds. SMC is paid an annual fixed charge per account and shareholder and
dividend transaction fees.
As the administrative agent for the Funds, SMC performs administrative
functions, such as regulatory filings, bookkeeping, accounting and pricing
functions for the Funds. For this service SMC receives on an annual basis, a
fee of .09% of the average daily net assets of Corporate Bond Series, U.S.
Government Series, Limited Maturity Bond Series, High Yield Series, and
Municipal Bond Fund and .045% of the average daily net assets of Cash Fund
calculated daily and payable monthly.
Income and Municipal Bond Funds have adopted Distribution Plans related
to the offering of Class B shares pursuant to Rule 12b-1 of the Investment
Company Act of 1940. The Plans provide for payments at an annual rate of 1.0% of
the average net assets of Class B shares. Class A shares of Income Fund and
Municipal Bond Fund incur 12b-1 distribution fees at an annual rate of .25% of
the average net assets of each Series.
Security Distributors, Inc. (SDl), a wholly-owned subsidiary of Security
Benefit Group, Inc., a financial services holding company, is national
distributor for Income and Municipal Bond Funds. SDI received net
underwriting commissions on sales of Class A shares and contingent deferred
sales charges (CDSC) on redemptions occurring within 5 years of the date of
purchase of Class B shares, after allowances to brokers and dealers for the
six month period ended June 30, 1998, in the amounts presented below:
<TABLE>
<CAPTION>
Corporate U.S. Limited High Municipal
Bond Government Maturity Yield Bond
Series Series Series Series Fund
________ __________ ________ ______ _______
<S> <C> <C> <C> <C> <C>
SDI underwriting
(Class A) $ 3,118 $2,101 $ 371 $ 507 $2,291
CDSC (Class B) $ 9,715 $1,614 $ 124 $ (694) $4,926
Broker/Dealer
(Class A) $12,563 $9,197 $1,861 $2,175 $5,667
Broker/Dealer
(Class B) $14,712 $4,581 $ 846 $5,612 $3,682
</TABLE>
Certain officers and directors of the Funds are also officers and/or
directors of Security Benefit Life Insurance Company and its subsidiaries,
which include SMC and SDI.
3. INVESTMENT TRANSACTIONS
Investment transactions for the six month period ended June 30,1998,
(excluding overnight investments and short-term debt securities) were as
follows:
<TABLE>
<CAPTION>
Corporate U.S. Limited High Municipal
Bond Government Maturity Yield Bond
Series Series Series Series Fund
________ __________ ________ ______ _______
<S> <C> <C> <C> <C> <C>
Purchases $25,227,918 $7,727,945 $3,067,521 $6,473,973 $11,303,413
Proceeds from
sales $23,557,207 $1,299,703 $2,985,660 $7,015,378 $9,884,965
</TABLE>
4. FEDERAL INCOME TAX MATTERS
The amounts of unrealized appreciation (depreciation) as of June 30, 1998,
were as follows:
<TABLE>
<CAPTION>
Corporate U.S. Limited High Municipal
Bond Government Maturity Yield Bond
Series Series Series Series Fund
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Gross unrealized
appreciation $2,134,121 $419,240 $130,175 $223,224 $904,367
Gross unrealized
depreciation (65,205) (5,770) (10,384) (64,595) (21,745)
---------- -------- -------- -------- --------
Net unrealized
appreciation $2,068,916 $413,470 $119,791 $158,629 $882,622
</TABLE>
- --------------------------------------------------------------------------------
35
<PAGE> 37
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- --------------------------------------------------------------------------------
36
<PAGE> 38
THE SECURITY GROUP OF
MUTUAL FUNDS
Security Growth and Income Fund
Security Equity Fund
* Equity Series
* Global Series
* Asset Allocation Series
* Social Awareness Series
* Value Series
* Small Company Series
Security Ultra Fund
Security Income Fund
* Corporate Bond Series
* U.S. Government Series
* Limited Maturity Bond Series
* High Yield Series
Security Municipal Bond Fund
Security Cash Fund
This report is submitted for the general information of the shareholders
of the Funds. The report is not authorized for distribution to prospective
investors in the Funds unless preceded or accompanied by an effective prospectus
which contains details concerning the sales charges and other pertinent
information.
SECURITY FUNDS
OFFICERS AND DIRECTORS
DIRECTORS
Donald A. Chubb, Jr.
John D. Cleland
Penny A. Lumpkin
Mark L. Morris, Jr., D.V.M.
Maynard F. Oliverius
Maria Fiorini Ramirez (Income Fund only)
James R. Schmank
OFFICERS
John D. Cleland, President
James R. Schmank, Vice President
Mark E. Young, Vice President
Steven M. Bowser, Vice President
Michael A. Peterson, Vice President
Thomas A. Swank, Vice President
Amy J. Lee, Secretary
Christopher D. Swickard, Assistant Secretary
Brenda M. Harwood, Treasurer and Assistant Secretary
- ----------------------------------- -------------------
[logo] SECURITY DISTRIBUTORS, INC. BULK RATE
U.S. POSTAGE PAID
- ----------------------------------- PERMIT NO. 941
CHICAGO, IL
-------------------
700 SW Harrison St.
Topeka, KS 66636-0001
(785) 431-3127
(800) 888-2461
